The purpose of this study is to investigate the diffusion of hydrogen technology and extend the utilization of hydrogen in Japanese economy by 2050. By simulating E3ME-FTT model and comparing policy scenarios with baseline, the economic and environmental impact of policy scenarios for hydrogen diffusion can be analyzed. Moreover, when carbon neutrality is tried to be realized by 2050, the impact on Japanese economy can be also measured. The results have shown that large-scale decarbonization with hydrogen diffusion is possible without losing economic activity. Investment in new hydrogen-based and other low-carbon technologies in the power sector, freight road transport, and iron and steel industry contributes to the positive GDP results as it invokes economic activity and requires additional employment.