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Until 1943, the Allies did not have any intention of removing Taiwan from Japan's Empire. Towards the end of the war, Taiwan's status was upped from colony to a full part of Japan that was divided into prefectures.

What if Japan were allowed to keep Taiwan following WW2? Perhaps there's a referendum in which the islanders are given the option of joining China, becoming independent, or remaining Japanese and the islanders opt to remain with Japan.

Alternatively, the KMT could be so thoroughly destroyed that they are unable to retreat to Taiwan. The allies proceed to just return Taiwan to Japan.

What would be the ramifications of a Japan that's ~20% larger in population and more ethnically diverse?
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