"Japan was seeking terms of surrender at the time."
"Debatable. Certainly there were elements in the civilian leadership and diplomatic corps who saw the writing on the wall and wanted to find a way out for Japan, but the military was in control of everything, including all the channels of communication. They (the civilians and diplomats) had made a very tenuous peace overture for the Russians to relay to the Americans, but the Russians basically stalled on them while gearing up for their own invasion of China, Korea, etc., When the Japanese military got wind of it, I believe they arrested the people who had reached out. What few peace signals reached the Americans were so obtusely worded and so buried in a thousand "to the last man, woman and child" messages that they were simply ignored."
The diplomatic efforts to the Russians was transmitted to the Japanese embassy in 'Code Purple,' which the Japanese knew the British and Americans had already cracked. Truman and Churchill already knew what cards Stalin was holding at Potsdam with respect to Japanese peace initiatives.
If the Roosevelt policy of 'unconditional surrender' had left room to ensure the integrity of the Emperor, whom the Japanese considered on the level of a 'god,' the ambiguity concerning the fate of the monarchy would have been resolved. Stimson was aware of this and requested the viability of a 'constitutional monarchy' be included in the demand for surrender, and his request was ignored at the conclusion of the Potsdam Conference. The people, including the military, obeyed the Emperor, and once the Emperor ordered the surrender, the war was over.