As I understand it, the Japanese plan for the Pacific War was to grab a bunch of territory, then negotiate peace from a position of strength. Did the Japanese ever try to start those peace negotiations, or did they go from "grab territory" to "no longer in a position of strength" too quickly?
Kantai Kessen (a variant of the Mahanian Doctrine) meant holding a solid perimeter of locations such as the Caroline islands, Marshall islands, Mariana Islands and Palau; and to wait for the enemy force to attack Japan. Having already suffered the effects of attrition from the Japanese perimeter the enemy force would be annihilated, ending their threat in the short-term; with a negotiated peace ending it in the long(er)-term.
Yamamoto's revised understanding of Kantai Kessen was simply to destroy the enemy fleet instead of waiting for it to suicidally charge at the Ryukyu Islands. He attempted to do this in the Battle of Pearl Harbor, Battle of Coral Sea, and Battle of Midway. While the first battle was a success, the second was inconclusive, and the third a crushing defeat. As such, Japan never reached the "position of strength" that it had sought. The command hoped that the US would still join forces to attempt a suicidal attack on the mainland's defenses. Aircraft, and aircraft carriers quickly put paid to that idea. The final straw grasp of the IJN was that the US's attempts to erode the Japanese perimeter islands would be too costly to the Allies. In the event, it proved far more costly to Japan to defend them than for the Allies to take.
The final, final straw grasp was that Japan herself would be too costly to invade and neutralize (and much of the armed forces were kept in reserve to that end). Again air superiority (particularly the atomic bomb) showed that that was no longer a card that could be played.
While the original plan was to try for a negotiated peace from a position of strength, these negotiations never began for reasons Duncan has already laid out.
However, there were attempts toward the end of the war. There was a camp within the Japanese leadership which argued for a negotiated surrender, but fears of what "unconditional surrender" would bring held them back. Disarmament, punishment for war crimes, occupation and removal of the Emperor were not acceptable.
Finally it was decided by the Big Six to approach the Soviets and open negotiations. The Soviets were still neutral and had recently confirmed their neutrality for at least a year. They hoped to strengthen their ties with the Soviets and drive a wedge between them and the western Allies by pointing out a neutral Japan on the Soviet Pacific coast would be preferable to an Allied occupied Japan. Unknown to Japan, the Allies had already cut a deal with the Soviets to attack Japan once Germany was defeated.
After Germany's surrender, the defeat on Okinawa, and realizing their ability to make war had vanished, The Emperor finally decided to open negotiations via the Soviets stating "I desire that concrete plans to end the war, unhampered by existing policy, be speedily studied and that efforts made to implement them." However, the fantasy of being able to fight on effectively persisted, and Unconditional Surrender remained a problem. Foreign Minister Shigenori Tōgō told his ambassador to the Soviets...
His Majesty the Emperor, mindful of the fact that the present war daily brings greater evil and sacrifice upon the peoples of all the belligerent powers, desires from his heart that it may be quickly terminated. But so long as England and the United States insist upon unconditional surrender, the Japanese Empire has no alternative but to fight on with all its strength for the honor and existence of the Motherland.
Unfortunately for the Japanese, the Allies had broken their diplomatic codes and were reading the whole conversation. The Soviets had already planned to invade Japanese held territory to gain more access to the Pacific and were just stalling for more time to shift troops east. The Potsdam Declaration ended Japanese hopes for a negotiated peace.