Not sure about Japan but Toyota sure was

Maybe, I think it is more about them having really put their eggs into the back then really innovative weak hybrid segment. BMW after all was also very much into hydrogen, and kept that ambition longer than many alive. Yet BMW has stayed pretty innovative and strong on EV R&D as well. I mean they have not expanded via that route but at least they kept their boat floating and I think the Neue Klasse is really exciting stuff.

I honestly don't know much about the domestic Japanese car market but it appears to me that there is also very little meaningful regulatory push for EVs, also via subsidies. Of all the regions with a strong traditional car industry it is surprisingly Europe where car manufacturers are the furthest in the transition to EVs. In the US, Tesla aside, which was founded as purely electric car company, the big players are almost regressing back or at least stagnating.

I've had all 3 (ICE, Hybrid, EV) and by far the EV is the clear winner.

Even better would be reliable and frequent public transit running on its own infrastructure.

You don't even need any special EV for that. Even one of the new Renault Twingos for 20k EUR would do. If you want to pay less, get one of the 2nd hand EVs, as long as they are not too old, they'll do it too.