OP stated that the USA remained neutral.Without the USA in the war Russia may come to terms earlier than OTL. If Germany achieves an armistice with Belgium, France and Italy the UK would not be in a position to enforce a continental blockade.
Fair enough. That still doesn't solve the issue of sub warfare. Germany can interdict British shipping however they want. That still doesn't mean they can hit neutral ships carrying supplies, much less the US. And then there's the issue of retaking the colonies. The only German presence in Africa by that point is Lettow-Vorbeck, and he can't really do much more to regain the colonies. It's likely Germany could get some of their African colonies back, and central African French and Belgian ones, but if they're not able to going to go all out against Britain and take the isles, they're going to face a stalemate anyway.
The best solution for Japan would be if they could offer payment to Germany for the islands they occupy. Otherwise you might end up with a cessation of hostilities and no German Japanese peace treaty. Without a peace treaty Germany could be inclined to support China in any Sion-Japanese dispute.
Pretty sure Germany is going to demand reparations anyway. Maybe they'll demand the isles back but that's way down the list of priorities.