Well, I find myself agreeing with Shadow Knight on most parts, and the general sentiment.
There is definitely going to be a sentiment among the Commonwealth to punish Japan, so the war is going to continue due to inertia. Once casualties start to mount from attacks on the home islands, though, there will be calls for peace.
After all, India, the Indochinese nations, and Venezuela have all been defeated. The vast alliance network has been disassembled, so for the foreseeable future Japan will find itself alone among the states of the world. It will have to moderate itself naturally in order to interact with even its former allies, much less its enemies. Or so will be the thought of those that say enough will be enough.
Hainan will be retaken. That much is known. I'll disagree and say that Formosa will most likely be retaken for the Chinese as well, but only after a long blockade and as part of the conditions for surrender. As for Korea... I had forgotten that China no longer has land access to the peninsula. In order for them to retake it, they would either need to gain access through the IEF (doubtful, as they definitely don't want China strengthened with a puppet Korean government) or they will have to do an invasion across the sea into Korea, which probably would be as difficult as invading the home islands.
Once the writing is on the wall, and before the 4 home islands are threatened, the Japanese will sue for peace. They can point to the model used for the French in the Great War. After all, the terms of the treaty, while harsh, did not disturb Metropolitan France and its largest, and geographically closest colony that contained a large number of French nationals. That, and they replaced monetary reforms with territorial concessions. If they know that they'll lose Hainan/Formosa anyways...
Upon those generic lines, I estimate that the following treaty for Japan and the Indochinese nations would be as follows:
1.Siam will have all territories annexed at the Treaty of Jaykarta restored to her.
2.China will have the islands of Hainan and Formosa restored to her. She will also be granted the Paracel Islands, the Pratas Islands, and the Diaoyu Islands.
3.China will be granted dominion over Indochina, as defined as Vietnam, Laos, Campuchea, and Siam.
4.China will allow Japanese nationals that inhabit the restored territories to freely return to Japan for a certain allotment of time. (Say 6 Months) After that period, Japanese nationals that do not leave will not be granted citizenship, and would have to proceed with the standard naturalization process.
5.Japanese nationals that do not wish to return to Japan and do not wish to remain may be allowed to instead emigrate to any allied nation that deigns to take them in.
6.Japan will retain the Ryukyu islands, the Bonin islands, the Korean peninsula, and all other islands that were controlled by Japan at the beginning of the war.
One and Three are related, and give a bit of a counterweight in a larger Siam to the Chinese. Otherwise, all of Indochina would easily be dominated.
Two should satisfy China's territorial ambitions for the moment. I don't see how the Paracel islands don't go to them. The only nation would would take them would be Vietnam, and at this point...
Four and Five relate to the expulsion of the Han from Hainan and the subsequent resettling of the Japanese onto the island. It will also allow a few defectors that don't wish to go back or stay in China to leave and go elsewhere, although there aren't many nations that open their doors. And those that do leave for another country are almost certainly to be on a case by case basis.
Six just solidifies the Japanese claim on Korea. With all of the nationals expelled from Hainan and Formosa, they have a large number of citizens that can be resettled in Korea.
Frankly, that could go either way. The only certainty that I can say is that Hainan will fall. (after all, I believe I remember a mention of the Chinese from Hainan leaving for the US, as China didn't want them. I wonder if that will come up)
