The effect on the army was exactly what you said. I’m guessing the Japanese leadership would realize it. The timing of this announcement was motivated entirely by domestic political concerns and not by military logic. It could not have come at a worse time.
The Japanese strategy all along was to dig in and hold on until the Americans wore out and quit. For a people who did not confront hard realities in their strategic thought, but used more wishful thinking, this had to be the best news they’d seen in a while.
Short of some game changing event, a truly “new thing” in the world, the Japanese aren’t going to quit now that they believe they’ve stared down the Americans and the Americans have blinked.
The way the end of the Pacific war is being planned does lead to the conclusion we probably need a "new thing" to finish the job.