@lain They really weren't. The six-man war council that had the power over that was still half-for-war, and they couldn't make peace without unanimity.
The Japanese government was far from a single united front (ask the IJA and IJN), and the pro-war faction was the biggest until the bombings shook it up. Even then, it had enough influence for the Kyūjō incident to happen.
Taking the Iraq example further, it's like if the Iraqi ambassador proposed peace while Saddam was dead-set on holding out.