Chaos in China, schism among the Reds... Interesting times indeed.
As the saying goes, interesting times breed interesting stories. Probably.
So the ATO has split in two. That's very good for Germany and probably for the whole word.
About China: I think that Republicans will win. Quing lacks popular support and exist only thanks to Japanese help, while other warlords are too weak to stop the Republic.
Germany? Yeah, probably. At the very least it removes the direct threat of American bomber wings arriving at a short notice to deliver a little atomic shaped present to the Kaiser and the Ruhr.
As to China...
Yeah, nothing can stop an idea whose time has come. The Chinese people have decided that they want a modern and sovereign nation, and modern media communications have enabled the Republican government to broadcast its messages into every hamlet across China via radio and television broadcast. The time has come for the Chinese people to demand, and seize, unification and popular sovereignty from those who for so long withheld it from them.
My wife visited Tsukuba as a student once! I didn't know it e an actually planned science city!
China will unite indeed, the question is how long the Japanese are willing to prop up the Qing and how willing it is to let go of its more direct territorial holdings, both in the Legations and in Port Arthur. The fact that the Japanese have seen that the Chinese were more than willing to expropriate the holdings of German companies and subjects, might deter any negotiated exit until those rights can be confirmed. The clock is however ticking, One must imagine that living under the shadow of the bomb has given the Chinese a need...
Oh that's neat. There's actually a rather bit in OTL Tsukuba that actually suggests its.... 'unnatural' Silicon Valley-esque origin. The weird oblong shape, as well as ironically the lack of any public transit until rather recently being among those things.
Japan can intervene and sweep away the Republicans I'm sure, but holding the Qing together in a real way or fighting a protracted war? Do Japanese want another WW2 level callup? I would say things are uncertain.
Also, if Menzies isn't dreaming up ways to slowly reduce Japanese control I'll eat my hat.
Australia has resources (in mindboggling quantities well beyond what has been discovered by this point TTL), with immigration it might also have population and it's got technical capabilities that might surprise, especially in this universe.
Historically there was a debate over whether Australia should be an atomic weapon state or continue relying on the UK. I can see Aus doing a South Africa/Israel this timeline to avoid ever being so brutalized again
Sydney will be stamped into the Aussie psyche for some time to come. Japan might forget about them, but they won't forget Japan.
Uncertainty is probably the best way to describe it. The Japanese have no real experience of fighting a long and protracted war in this timeline, barring the distant Weltkrieg. What conflicts it has fought have been quick actions to restore control, a number of border skirmishes and quite a few forever war insurgency type of deals, from Korea to Indonesia. China falls into the latter category, at least for the moment and the Japanese might well believe that they can, if not win, then at least force the Chinese into line enough to restore at least a fraction of its resource exports.
As to Menzies, the man can of course dream. However what we have to consider is that he is fundamentally the leader of a collaboration government. One with quite a bit of popular support mind you, even if the election results are being... fudged a bit. Clearing himself of the 'sin' of collaboration will prove a rather difficult deed. Especially if the Australian export economy, that has allowed for the country to take new heights and away from the austerity, conscription, siege mentality and massive losses in lives of the Syndicalist War era under Labour.
That is however not to say that Aussies won't 'Remember Sydney' or try and remember a golden era before "the Jap arrived and enslaved us" read, bumped us down on the pyramid of racial hierarchy. Just that such thoughts might be outweighed by the economic benefit that average Australians has received to a degree. That is once the issue of who controls Tasmania is solved.
From my reading of the story, the Chinese civil war is now a struggle between a few military-aristocracies which rule their lands at gun point with no overarching legitimacy, a religious cult that absorbed a lot of the fanaticism that IOTL went into the Chinese communist movement, and a Chinese republican state in which popular sovereignty is expressed through free elections and legitimacy is derived via the continuous empowerment of the elected government by an elected legislature, no? How can the military-aristocracies even stand a chance, even with Japanese military support? What's their claim to power, how to they motivate villages and towns to obey their laws, pay their taxes, and send their sons for military service? China is a nation of close to a billion people, and the only other halfway legitimate state just imploded. What's stopping the Chinese republic to go all French revolution on the remaining foreign, religious and aristocratic armies on its soil, now? Aux armes, citoyens ! Formez vos bataillons !

With a popular cause, and a legitimate banner flying in the wind, what are a hundred thousand casualties...
Australia likely has a rather large and growing Japanese population. It's no longer the Australia we know from our postwar history, is was under Japanese domination for close to twenty years now, right? It's a hybrid European-Asian nation now, as dependant on Japan for everything from trade over communications to security, as west Germany or Japan were dependant on the United States IOTL, plus on top of that, with a sizable population working in the mining and logistics industries, that are Japanese born and definitely don't identify with a separate Australian identity? Also, completely transparent to the Japanese intelligence services. If Australia builds nuclear weapons then that would be because Japan actively allows and encourages them to do that, no?
This may be a flaw in my reading or a matter of assumption. I was not of the impression australia was substantially Japanese in its demography.
Everything you say follows, but only if there are enough Japanese in Aus. If there are, the threat of that sort of govt led campaign are much reduced, and its more simmering racial tensions stuff.
It was not really clearly implied, at least I don't remember it so much. Japan in this TL is a kind of "nice" Japan, but they clearly made Australia a client state after nuking and conquering it, and Japanese businesses invested billions into the Australian economy. Given that Australia as of WW2 was a very thinly populated nation, and that Japan was the Imperial overlord who called all the shots and maintained a military presence in the nation, I just can't imagine that Japanese companies will wanted to invest in Australia would not heavily lobby the Japanese government to tell Australia to adjust its immigration laws. For one, 1940s Japan is/was an overpopulated nation with pretty low wages for skilled labor, and Australia the total opposite. It's just good business practice to bring your own cheap yet qualified work force for overseas projects, and not hire super expensive and rare to find locals, if you can do that. As of 2020 that's totally the Chinese M.O. in Africa. Why would Japan not do that? They're a capitalist nation, and Australia is their client, so totally of course they would move work forces globally to maximize profits, the British did totally the same thing in their heyday, that's why there are so many Indians in South Africa and in Guyana, and so many Chinese in Malaysia and Singapore. Why wouldn't there now be a lot of Japanese in Australia, the situation is no different.
Basically I think it's reasonable to expect that Australia would, after 20 years in the Japanese economic and political sphere, have a demographic imprint. Maybe it's only a few % and only in mining towns and a few big cities. Maybe it's already a lot more. Australia IOTL went from 7 million people in 1941 to 10.5 in 1961, 2% yearly change, with not a lot of immigration. Add just half a million Japanese, without natural growth, and that's already 5%.
Well it's explicitly stated that the Chinese are coming in to labour in significant numbers (this wouldn't be the first time that happened in Aus) I just didn't make the jump to half a million new Japanese residents down under. Japanese colonisation efforts faced difficulties OTL, but here I do suppose they've had several extra decades.
The question of what those workers are doing then becomes quite important in terms of where they're located and what the society looks like.
If anything, having them in mining is probably less likely to cause tensions/problems. If you look at Australia, besides the obvious point of it being bloody massive (and it is massive) you'll also note that the resource zones (of the types you're exporting) aren't really near the biggest cities (Melbourne and (formerly) Sydney). Melbourne and Sydney are industrial/commercial, and besides mining their own coal for power generation, they're not really the source of resource exports (barring agriculture).
Iron ore, Uranium, Coal etc. are going to be hunted for up North or out West, and Japanese dominated mining towns aren't going to have too many chances to clash with proximate and anglo locals. It'll be a lot of company towns where English isn't even a majority language.
If it's less a case of a 2% Japanese minority in Melbourne and Sydney than a 75% Japanese Majority in Kalgoorlie or something, then suddenly the apparent peace and quiet becomes easier to understand.
Just to get a few points straight, Australia has spent just over a decade inside the Japanese sphere and by 1963 just a year short of it as 'independent'. During that short interval of direct Japanese control, the Japanese did away with the White Australia Policy, a real kick in the teeth prestige wise, broke Australia and New Zealand up again and stapled a number of islands onto the Empire.
I would however not call it a hybrid European-Asian nation, at least not yet and for now not necessarily for the reasons discussed. The process is of course ongoing and the sudden influx of masses of Chinese refugees might rapidly increase that pace. However, at least up until now, at least as far as private individuals are concerned there has been little reason for Japanese to uproot their family, or even just themselves, and move to Australia. The Japanese economy was still growing at quite a rapid pace and in some sectors it could also be called booming. The Japanese had also gained labour rights, although tied to government approval of the unions, and had been slowly but surely struggling with companies for higher wages. Jodel might remember a similar discussion when it comes to Germans moving to the United Baltic Duchy after the first Weltkrieg.
Construction projects and such by zaibatsu or smaller concerns have definitely seen some Japanese relocate to the region, however it has likely been a temporary measure rather than a permanent posting for the vast majority of those people. There have doubtlessly also been some Japanese Anglophiles or just workers believing that they could get a better wage or labour rights in Australia, however that contingent itself would likely number in the tens of thousands not hundreds of thousands. A bigger case can be made for migration by Koreans, wanting to escape direct Japanese persecution, and the Chinese, both from the Mainland and from across South East Asia. Altogether with the Japanese that Asian contingent might probably reach the discussed 5 to 7 percent of the at time Australian population.
However, there is one very obvious demographic footprint that I think you might be overlooking. That is the presence of the Imperial Army, Navy and Air Force. Now of course whilst they cannot vote, their 125,000 men as well as their average of maybe 2 dependents, in the case of regulars, and other associated service personnel do make a rather noticeable difference in Australian demographics. Tasmania is perhaps the most clear example of their presence in the region, however it is not the largest deployment base as that fortune has fallen on Brisbane. Sydney, Perth, Adelaide and Darwin also feature sizeable Japanese garrisons with Darwin having probably seen the most rapid demographic shift. Given that it hosts an airbase as well as much of the ageing Japanese battle fleet, with an accompaniment of marine units.
edit;
Before I forgot about this again. I wanted to share this map with you.