Over the past five years a host of public and private investments in Europe and North America have supported hydrogen propulsion start-ups OEMs aiming to disrupt the status quo as well as programmes by some established OEMs, led by Airbus’ ZEROe ambitions. But these two regions are not only protagonists in hydrogen’s premise to decarbonise flight – Japan is fast becoming a major actor, both industrially and financially.
This report, on the heels of last month’s Ishka Japan conference, outlines the country’s hydrogen aviation aspirations and examines how an established aviation investor and a recently established airline holding – ITOCHU and Toki Aviation Capital – are playing their part.
Japan, no stranger to hydrogen
To anyone following road vehicle developments over the past two decades, it will come as no surprise to see Japan mentioned as a hydrogen pioneer. Toyota and Honda became the first automakers in the world to sell government-certified and mass-produced hydrogen fuel cell vehicles in the early 2000s, and while improvements in battery-electric technology have since curtailed the market outlook of hydrogen cars, they have played a major role in placing hydrogen atop of Japan’s industrial climate transition agenda.
In 2017, the country became the first in the world to formulate a national hydrogen strategy which included sectoral recommendations to increase global and domestic production and demand for hydrogen. That strategy only foresaw hydrogen playing a part in aviation as part of the SAF supply chain, but more recently the government has broadened its view on how hydrogen can play a role in future aviation technologies.
In October 2023, Japan’s Ministry of Economy, Trade and Industry (METI) announced it planned to allocate a total of 17.3 billion yen ($120 million) toward research related to developing hydrogen fuel cell systems for aircraft – part of some $14 billion to be spent in hydrogen-related research over the next 10 years. Japan’s Aerospace Exploration Agency (JAXA) has also been working with Japanese hydrogen technology developers with a view to an eventual hydrogen aircraft that could enter service in 2035.
Finally, earlier this year, METI published a new strategic plan for the country’s aircraft industry to commercialise a “next-generation passenger aircraft from 2035 onwards” with “decarbonised” propulsion, “such as hybrid and hydrogen engines”, mentioned as options. The strategy followed the definitive cancellation in 2023 of the Mitsubishi SpaceJet programme, which had been slated to become Japan’s first domestically produced jet airliner.
ITOCHU launches hydrogen business with a bet on ZeroAvia
Most Japanese general trading companies, financial powerhouses with highly diversified portfolios, have made investments in aviation new propulsion technologies and hydrogen has been no exception. Sojitz Corporation and Mitsubishi HC Capital made early investments in Universal Hydrogen (which has since ceased operations) in 2021, while this year ITOCHU Corporation became an investor in ZeroAvia as part of the firm’s recently completed $150 million Series C Financing. The ITOCHU investment, first announced in July, came just days after the collapse of Universal Hydrogen.
However, the timing of that announcement, the firm tells Ishka, was only “coincidental.” “We hope that [ZeroAvia’s] technology will disrupt big markets like turboprops and narrowbodies in the future […] we believe their [aircraft retrofit] strategy is very effective,” says Kosuke Ito, manager of the newly-created Section No. 4 of ITOCHU’s Aerospace Department, which will oversee ITOCHU’s investments in the hydrogen, aircraft interiors, and aftermarket businesses.
Ito says ITOCHU was drawn to its ZeroAvia investment by the firm’s hydrogen ecosystem approach to creating a new market, and existing relationships with some of ZeroAvia’s backers, like British Airways and Amazon. However, what pushed ITOCHU’s investment over the line, Ito acknowledges, was investment by Airbus – not Airbus Ventures, the OEM’s venture capital arm, but the OEM itself, – a priced vote of confidence in ZeroAvia’s technology by one of the world’s largest aircraft OEMs.
In parallel to its investment in ZeroAvia, ITOCHU is also a non-exclusive sales representative for ZeroAvia in Japan and throughout Asia, and the firm tells Ishka that it has already begun sales activities to explore potential opportunities.
More than meets the eye in Toki Air’s hydrogen start-up links
Japanese airlines are also not standing still. At the end of last year, Japan Airlines announced it had signed “basic agreements” with three hydrogen-electric aircraft/engine manufacturers (H2FLY, ZeroAvia, and Universal Hydrogen – the latter still active at the time). JAL’s intention under this agreement is to study the “safety, economic feasibility and maintainability” of next-generation aircraft. ANA has also entered into agreement with Airbus on a joint research project for the development of hydrogen aircraft and infrastructure.
The initiatives of these two airlines are in line with partnerships by flag carriers elsewhere, aimed at understanding future technology development, sharing operator feedback, and supporting ecosystem development.
A bit more unconventional is the partnership between aviation services holding company Toki Aviation Capital and Dutch hydrogen aircraft developer Fokker Next Gen (FNG), announced last June. Toki Aviation Capital’s main subsidiary is Toki Air, an airline based in Niigata Airport which started operations in January 2024 and the first independent airline to obtain an AOC in Japan since 2009. The all-ATR carrier currently has two aircraft supporting Niigata’s domestic connectivity and has plans to connect nearby Sado Island as the Japanese launch customer of the ATR 42-600S, a STOL variant launched in 2019.
Flavio Sasaki, Toki Air’s senior manager of business and strategies, explains to Ishka that Toki Aviation Capital’s strategic value to FNG goes beyond what operators can typically contribute. Both Sasaki and Toki Air’s founder, Masaki Hasegawa, have extensive OEM backgrounds, including at the now-discontinued Mitsubishi SpaceJet programme. This experience makes Toki Aviation Capital a valuable nexus that could link FNG with Japanese aerospace suppliers, potentially allowing FNG to aspire to Japanese government funding.
“Our intention is to support Fokker Next Gen in Japan, to strengthen the relationship with some heavy industries, and also JCAB (Japan’s civil aviation authority), METI, and DBJ (the Development Bank of Japan) in order to try to find some potential investors in Japan,” Sasaki explains, pointing to METI’s plans to develop Japan’s aerospace hydrogen ecosystem by 2035.
Ishka notes that DBJ, a commercial bank established by the Japanese government, has previously invested in overseas aerospace programmes of strategic importance to Japanese suppliers. “[FNG’s] strategy today is to be an integrator of the programme, not a manufacturer of parts,” explains Sasaki.
Toki’s support of FNG in Japan, which Sasaki says is entirely pro-bono, is the main motivation for their recent MoU, although it also allows Toki Aviation Capital to better understand hydrogen aircraft infrastructure with a view to the future. The Japanese firm is also a member of Heart Aerospace’s Industry Advisory Board, giving them insights into their hybrid-electric aircraft development.
The Ishka View
There are at least eight active start-up OEMs working on fixed-wing clean-sheet designs or retrofit solutions involving hydrogen propulsion, not including established OEMs. While none of them are based in Japan, the country may have a lot to offer them – from technology to investment. According to Japanese government figures, from 2010 to 2021 the country filed more climate-tech patents in the areas of hydrogen and fuel ammonia than South Korea, Germany, France and the UK combined. The country also surpassed the US in climate-tech patents filed in those areas. If Japan does prioritise hydrogen propulsion in a relaunched domestic aircraft programme, not only will aerospace suppliers in the country be able to lean on existing hydrogen industrial capabilities, but they may also become central to the production of hydrogen-fuelled aircraft elsewhere.
At the same time, the interest in alternative propulsion by Japanese general trading companies transcends national priorities – their aviation investment strategies have long valued verticality across the full value chain of an aircraft, including manufacturing. Given the likelihood that new propulsion technologies could reshape the sector in the next two decades, diversification across the new propulsion space makes a lot of sense. The green hydrogen economy and sustainable fuels are also notable features of the Sustainable Development Goals (SDGs), which have increasingly been integrated into the business strategies of Japanese companies. Last but not least, while investments in sustainable technologies are often framed as being core to a company's ethos all around the world, this can take on a special meaning in Japan. Japanese corporations are well known for closely observing their foundational principles (traditional values, philosophies, or management practices) and building business strategies around them. In the case of ITOCHU, the firm's 'Sanpo Yoshi' corporate principles have been credited for its ZeroAvia investment.
