In 1937 the Battle of Shanghai begins between Japanese and Chinese forces. Rather than throwing his elite unites into the meat grinder Chiang Kai-shek uses them sparingly focusing on conscripted and semi-trained soldiers performing massed attacks and defensive fighting within the city. The elites begin building impressive defensive lines between Shanghai and Nanking an obvious target for the Japanese army.
In early October the victorious and blooded Japanese army achieves total victory in Shanghai. The march to Nanking had begun.
The well trained Chinese officers and units began a slow, fighting retreat. Every time they risked being overrun they threw the more numerous but fairly incompetent regular units at the Japanese buying time. This also forced the Japanese to deal with tens of thousands of prisoners. Even with mass executions, many Japanese soldiers are taken off the front lines to deal with them.
By the time the Japanese reach Nanking in mid November, while the Elite Chinese army is tired and battered they still exist as a strong and now experienced fighting force. The Japanese on the other hand are frustrated bloodied, exhausted and using a lot more resources than originally planned.
The Battle of Nanking sees the city destroyed but the Chinese army holds the line. By late December Japan is in a stalemate, and the military is losing support even though its attacks in Northern China are advancing. The USA and Britain start pointedly making comments about helping China in the very near future.
In January the Navy performs a quiet coup and takes control of the government with minimal bloodshed. A cease fire is declared and eagerly accepted by China which is at the breaking point, but still maintains a strong face.
An agreement is made. Japan returns some of the coastal territory in Southern China, but keeps Hainan. This allows Japan to keep its territory more centralized and defensible. In return Japan keeps all of its gains in Northern China.
The Northern Chinese territory is made into semi-autonomous zones under Japanese control.
When Nazi Germany goes to war, Fascist Italy, Spain, and Japan offer moral support only and some trade benefits. Japan also takes most of Frances East Asian territory immediately after France falls much like OTL. Paying a small fee to the Vichy French government to avoid a war.
As the Great European War turns south for Germany, the other Fascist countries look warily at the raging Soviet Union and vengeful allies. A Pact of Fascist States is created between Spain, Japan, Italy, Greece, Turkey and Argentina. Japan is the leading nation of the alliance.
During the cold war, the Fascists, Soviets and Democrats compete against each other in the colonies, militarily and economically. To build its strength Japan has skilled workers from other Fascist countries and immigrants with fascist ideals move to its Chinese, Korean and South-East Asian territories to industrialize the areas. Many of these temporary workers bring their families and eventually become citizens, lording it over their employees.
In the European colonies the Soviets, Fascists and Democrats all fight with each other for the hearts and minds of the population. Each one tries to show itself as the best hope of the people. The Fascists led by Japan try to show that a country led by a strong leader and strong ruling council is much better than mob rule. This is accepted by many countries who are taught about their great chiefs and kings from before the Europeans came around. Also the fact that Japan is the leader of the Fascists is well received by people tired of White men telling them what to do.
With the money flowing in to neutral, leaning and Fascist countries throughout Asia, Africa and South America for humanitarian, industrial and military aid, Japan is seen as a leading light amongst many poor nations. This image is also helped when Japan sent military and financial aid to Tibet during the short lived Tibet-China War in 1971 that nearly ended in WW3 between the Democrats and Fascists.
In a further attempt to win allies many poor Africans and South Americans have been granted refugee status in the Chinese and South East Asia autonomous zones of the Japanese Empire. While the Soviets and Democrats say that the refugees are little more than slave labour and hostages to keep the countries in line. Most of the refugees are happy to escape the wars and famines in their own countries as the three super powers support different warring factions.
The Fascist Alliance is the least technologically advanced of the three factions, but their economy is very good and they are very industrialized. To help keep their far flung alliance together and to provide a threat against the Democrats and Soviets the Japanese has built a very large fleet second only to the USA. And while their tanks and rockets are behind the other powers, their subs and ships are first rate, and their planes while fragile are extremely maneuverable and are some of the best carrier launched planes in existence. The Japanese fleet operates in every ocean using friendly ports in every continent, Haiti being the sole port in North America.
When the Soviet Union collapsed in 1994 Japan was able to quickly take all of Sakhalin, the Kuriles by paying one billion dollars directly to the corrupt military junta leaders that controlled the Russians Workers Republic for 5 months. When the Soviets retook power in 1995 and demanded the islands back, Japan paid a further 1 billion dollars and prepared their nuclear weapons. The Reformed Soviet Union took the money and backed down.
Today Japan is the main rival to the USA and despite having some rebels in its Autonomous Territories is still seen by many countries and people outside of Asia as a saviour and humanitarian country that is opposed to the neo-colonialism of Europe and America.