I say never surrender!!!
Even if it looks hopeless.
Keep in mind that in this game after the allies take Japan, that the game is not officially over. Japan gets to try and recapture Tokyo in its next turn (of course it won’t have any $). The allies may have used all their resources to take Japan and lost most of their fleet due to scramble. The allied 2 hit ships won’t be repaired. As said before Japan can drop a ton of inf w/some air support on the Island, so the allied invasion force could also be very weak. Obviously Japan would have to have a secondary force steaming back home, but its possible. In a nut shell both sides could be decimated, and it would be back to square one. The US should have the upper hand due to income, but it would be several rounds before it could mount another attack, giving Japan time to reclaim some tt.
I know its a long shot, but I have seen powers come back from the dead in other AA games. Granted those games normally have allies to bail them out. It would be like a huge 4th come back in football. You wouldn’t want to be the person that walked out of the stadium at 1/2 time.