What was Japan's grand strategy in WW2?

Prior to WWII Japan's strategy was to draw the US Navy into a conflict relatively near to the Japanese home islands where a decisive battle could be fought. Japan's objective was to allow their fleet to operate near their own bases while forcing the US fleet to operate far from theirs. This would allow the Japanese to conduct a battle of attrition against the US fleet as they advanced across the Pacific so that by the time the US fleet arrived in the battle area - which Japanese planners had moved further west and south as their capabilities improved - the Japanese fleet would be numerically superior to the US fleet and could win a fleet-on-fleet engagement due to superior technology and morale.

Of course, this never happened. The preemptive attack against Pearl Harbor was a contradiction of the plans the Japanese had formulated in the 1920s and 30s, which relied on taking a defensive stance against the United States and forcing the US fleet to bring the war to Japan. As Yamamoto had every reason to understand, once the United States was attacked - and most importantly was attacked without a declaration of war having been made - there was little hope that the United States would ever sue for peace, and there was equally little hope that Japan could hold out once the industrial capabilities of the United States were redirected to produce war materials. In effect, Japan lost the war on December 7, 1941.

Strategy:

1. Cripple the US pacific fleet.
2. Grab all the pacific islands.
3. Weaken the Americans as they fight their way across the Pacific.
4. Annihilate the US fleet in a decisive battle.
5. ???

This is known as the Southern Strategy, which was favoured by the navy. The army favoured the Northern Strategy. However, the Northern Strategy derailed after the Japanese army got trashed during the battles of Khalkhin Gol.

The Japanese army and navy weren't really cooperating, more like competing against each other. (That was one of the reasons why Japan didn't have an independent air force. Both weren't very keen on setting up another competitor.) Once the Northern strategy didn't work, the navy got enough political support to pursue the southern strategy.

The Japanese were well aware what they were up against. They knew America would be a formidable enemy. However, they only had bad options to choose from. So they picked the least bad option.

What were the options?

• Withdraw from Manchuria and China - unacceptable
• Continue the conquest of China - They did that, but the conquest was already stalling
• Pursue the Northern Strategy - had already failed
• Submit to the demands of the US - unacceptable
• Do a surprise attack on the fleet in Pearl Harbor, to try to force the USA to accept the destruction of the fleet and the consequent inability to do anything about it as fait accompli.

The Japanese were well aware they had to strike fast and hard to accomplish that. As surrender was not in their vocabulary, they choose the least bad option, being the attack on Pearl Harbor. Even Yamamoto himself said Japan would have 6-12 months to accomplish their goals. After 12 months the USA would outproduce and outgun Japan in any field. With hindsight: he was right, almost up to the day...

What went wrong? The attack itself, of course. The Japanese embassy wasn't going to hand over a declaration of war, as has been suggested by many. About 30 minutes before hostilities were to begin, they were to break of negotiations. Not to deliver a declaration of war. The official declaration of war followed one hour after the attack. Even if the Japanese diplomats followed the plan exactly, it would still have been considered a sneak attack by the American public.

Analysis: Clearly, the plan was off the rails by the end of Midway (somewhere around moving from 2. to 3.); and it seems near impossible to imagine Leyte Gulf ending with a resounding Japanese victory.

Midway was indeed the turning point in the Pacific War, but even a Japanese victory would merely have postponed the inevitable. Supposing the USA lost that battle and all carriers, they were already building 12 replacement carriers. The Japanese lost 4 carriers, and weren't able to replace any of them. Partly because they lacked the industrial resources, and partly because they simply lacked the pilots and mechanics to replace what was lost.

They were able to launch two new carriers (one by converting a super battleship under construction into a carrier), but they didn't have the planes or the pilots to fly them, the mechanics to service the ship and the planes, not even the enough fuel for both. Remember that the Yamato was on a one way mission to Okinawa. At that time Japan didn't have enough fuel for anything else.

How do you get from decisively defeating the Americans to getting them to agree to peace? It's not that complicated - many negotiated peaces in the past have not been unconditional surrenders for the same reason: it is not trivial to force the opponent to surrender.

Let's say step four of your description happens and the Japanese annihilates the US fleet in battle. Now the US could just build another fleet and try again. Or they might not. Check out this paragraph from the Wikipedia page on Operation Downfall, the planned invasion of the Japanese home islands in 1945.

Japan's geography made this invasion plan quite obvious to the Japanese as well; they were able to accurately predict the Allied invasion plans and thus adjust their defensive plan, Operation Ketsugō, accordingly. The Japanese planned an all-out defense of Kyūshū, with little left in reserve for any subsequent defense operations. Casualty predictions varied widely, but were extremely high. Depending on the degree to which Japanese civilians would have resisted the invasion, estimates ran up into the millions for Allied casualties.

(emphasis mine)

Let's say you're the American president and your fleet has just been annihilated by the Japanese. Your planners tell you that you can probably win by military force, but it will cost millions of casualties, not to mention billions of dollars to build more ships and planes. Do you do it? It's not just as simple as "doing it" as well: you need to convince Congress, and by extension the American public, that it is worth doing it. This political will is not necessarily present. If the Japanese had landed an invading force on the US mainland, then we can be confident that the political will to resist the invasion would be there, because the existence of the country is threatened. It's not so clear when it comes to forcing a distant country to submit. What is the benefit of prosecuting the war to the bitter end? What could go wrong if we agree to an armistice with terms favorable to us?

Some historical examples where the more powerful side didn't muster the political will to destroy the weaker side:

• First Chechen War: obviously the Russians are not going to lose (i.e. get conquered), but they certainly didn't feel like winning.
• Vietnam War: I don't doubt that the US could have destroyed North Vietnam, with a mix of mass conscription, mobilizing a war economy, unrestricted bombing campaigns, and/or nuclear weapons.
• Continuation War

Finally: not exactly what you are asking, but it's worth pointing out that Japan didn't actually anticipate the events you describe. They were hoping that the war will not last for very long. See the Wikipedia article on the Attack on Pearl Harbor.

The Japanese attack had several major aims. First, it intended to destroy important American fleet units, thereby preventing the Pacific Fleet from interfering with Japanese conquest of the Dutch East Indies and Malaya and to enable Japan to conquer Southeast Asia without interference. Second, it was hoped to buy time for Japan to consolidate its position and increase its naval strength before shipbuilding authorized by the 1940 Vinson-Walsh Act erased any chance of victory. Third, to deliver a blow to America's ability to mobilize its forces in the Pacific, battleships were chosen as the main targets, since they were the prestige ships of any navy at the time. Finally, it was hoped that the attack would undermine American morale such that the U.S. government would drop its demands contrary to Japanese interests and would seek a compromise peace with Japan.

...

Japanese confidence in their ability to achieve a short, victorious war also meant other targets in the harbor, especially the navy yard, oil tank farms, and submarine base, were ignored, since—by their thinking—the war would be over before the influence of these facilities would be felt.

(Again, emphasis mine)

It is a mistake to think of "Japan" or "the Japanese" as a single entity. They were individuals in various positions. Some analysts were convinced that war with the US was unwinnable, and briefed the government on that. Some militarists were convinced that the Yamato spirit would prevail. Others saw no alternative to a war they were unlikely to win, it is this last group who might be blamed for not having plans.

• Japan had a decision making process where domestic concerns overrode rational foreign policy. They're hardly unique in that, but it was an egregious case. Japan 1941 by Eri Hotta is a nice description.
• The Japanese had the experience of having beaten the Imperial Russian navy with about the same strategy. The Czar did fold, why not the US? After all, the Western Pacific was not vitally important to the US.
• Some Japanese had a belief that discipline and dedication would overcome materiel deficiencies, and that they had this discipline. Supposedly Napoleon said something like In war, the morale is to the physical as three is to one.
• They had grossly unrealistic production plans for synthetic fuel that would have allowed strategic mobility for their (well-trained) carrier crews.