The Japanese were seeking peace negotiations from Potsdam onward. The sticking point in the negotiations was the status of the Emperor. The Japanese felt that if he was tried as a war criminal, their society would fall apart.
Common misbelief, but wrong.
Japan was not seeking peace, they were not interested in any kind of surrender. What they wanted as an armistace.
In other words, what ended WWI. Both sides stop fighting, and return to their positions prior to December 1941. No war crime trials, no occupation, basically pretend that the previous 4 years never happened. In fact, all the islands recently captured with death and blood from the Japanese would be returned to them. Okinawa, Iwo Jima, Saipan, Tarawa, Guadalcanal, all of them. The only one they were willing to release was Chosin (Korea), as they knew they would never be able to get the Soviets to agree to leave, and many were thinking that territory was more trouble than it was worth.
Status quo ante bellum.
There was absolutely no way that the Allies would have ever agreed to that. That was how WWI ended, and they were not about to allow that to happen ever again.
An armistice is not "Peace", it is simply a halt to the fighting. Korea is not at peace, it is a decades long armistice. WWI only ended with an armistice because half of the nations involved broke down into revolution and anarchy so quite literally there was nobody left to really organize a peace with in the first place. Italy, Germany, Russia, all were gone or on the way out.
Oh, the Allies knew full well that without a firm and binding peace treaty, Japan would not have learned it's lesson and like Germany would rise again, more beligerant and agressive than it had been before.