Yes, the Japanese oil is only scented - same approach as with keris oil since pure essential "oils" would evaporate and leave no protection for the blade. Not to mention that your storage room would smell pretty much like a dental clinic...
BTW, the regular (expensive) sandalwood oil is already heavily diluted with some base oil (wether with mineral oil or some plant/edible oil may depend on your source). Really pure essential sandalwood oil is terribly expensive but offers the advantage that you really know what's in your customized mix...
Regards,
Kai