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I have been reading about the Pacific War in its final months and came across a proposal by the allies to the Japanese for a negotiated peace in July 1945. If this was accepted what could both sides expect? How would the USSR react? Bare in mind in July the Japanese still controlled parts of Burma, Malaysia, Indonesia (except for most of West Irian), Manchukuo etc.

http://upload.wikimedia.org/wikipedia/commons/8/8a/World_War_II_1945_07.png

Also what the effects be on the modern world? Would the emperor retain much power or would Japan become a 'colonial democracy'?
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