Japan is the largest automobile producing nation in the world, and its automobile holding has been ranked at the second place, next to the United States (U.S.). The automotive vehicle population has dramatically increased, and it has created overcrowded-situations in urban areas. An increased number of highways has somewhat improved the traffic conditions. However, a deterioration of transportation efficiency has caused poor fuel economy and air quality and it has caused serious concern for the human life in Japanese cities from the perspectives of energy conservation and environmental safety.The Guideway Bus System has been developed as an alternative transportation system to solve the Japanese urban traffic problem. The system reduces the number of cars in the city and retains the convenience of bus transportation systems currently being used in most cities in Japan. The guideway bus system uses a hybrid powerplant consisting of a diesel engine and an electric motor. The system is suitable for small city transportation because of its low construction cost and its high potential for maintaining a cleaner environment by using clean electric power generating plants developed in Japan.This paper describes the present status of the development of the new transportation system which includes the Guideway Bus System and the clean electric power generating plants in Japan. The system has also been compared with those developed by other nations.