What does domestic oil have to do with anything? Japan doesn't have domestic natgas either AFAIK, and you need that to make hydrogen unless you make it from electrolysis of water, which needs lots of electricity, which usually comes from fossil fuels too.

Hydrogen had no way of removing any disadvantage for them. It was just something they were ahead in and thought they could push on the world as the replacement for gasoline, and profit in the process.