But if it's a choice between the most heavily populated country in the world, and some lightly defended colonial possessions with disaffected native populations, and both offer rich resources, why take the hard option?
The British, Dutch and Americans were clearly willing to fight when they saw the threat Japan posed, but initially lacked the strength. If Japan can win an even more decisive victory than it actually did, and is backed up by China, they may accept peace on Japanese terms in order to focus on Europe. In a way this is what Britain did in 1940 when Japan demanded the closure of the Burma Road. Europe took priority over Asia, so the road was closed.
On the other hand, China lacked the industrial development to defeat Japan, but had the large and willing population base to allow it to resist from day one of the invasion. It was also like the USSR in a way, being able to give territory for time. China can't be an easy victory, but there's a slight possibility that SE Asia can.