A weak yen has been a key factor bolstering balance sheets of Japanese automakers in recent years, but aggressive investment into hydrogen fuel cars could be the sector's next major growth driver, according to a senior industry analyst.
By concentrating on research and development in technology, the profits of Japanese carmakers could even surpass their U.S. peers, Vivek Vaidya, vice president at Frost & Sullivan told CNBC, adding that Toyota is likely to be the most profitable name.
Hydrogen fuel doesn't emit carbon dioxide when burned so it's classified as a zero-emission fuel that can help reduce greenhouse gases. Unlike traditional gasoline-powered vehicles, these fuel cell cars run on hydrogen gas that is used to power an electric motor.
Toyota Motor and Honda already have unveiled mass-market hydrogen fuel-cell cars: The former's model launched last year while Honda debuted its Clarity fuel cell vehicle at last week's Tokyo Motor Show.
Both are benefiting from around $25,000 in government subsidies as Prime Minister Shinzo Abe aims to embrace alternative energy sources to nuclear power, which has received widespread public rebuke following the 2011 Fukushima disaster. In 2014, Abe announced grand plans for the world's third-largest economy to become a 'hydrogen society,' one in which the chemical is a secondary energy source.