As with many things in World War II, the Japanese were not
united on this issue. There were arguments between the Navy and the Army (which had a
very hard time getting along on anything) as to whether invasion of Australia would be
possible. I would suggest that you look at The Rising Sun by John
Toland as a source on this.
Toland tells us (pages 345-6 in
the paperback edition of the book that I have) that the Navy actually did want to invade
Australia. This was early in the war when the US was very much on the defensive. The
Navy thought it could take five Army divisions and use them to invade
Australia.
The Army thought the plan was ludicrous. They
pointed out that Australia was much larger than Japanese-occupied China and would be
much harder to accomplish. They further argued that there was not enough shipping to
make the invasion work.
Eventually, the Army won out and
the plan to invade Australia was scrapped. That would seem to indicate that, in the
eyes of the Japanese high command, at least, it was not within Japan's capabilities to
invade and subjugate Australia. As for intentions, there was such an intention on the
part of the Navy but not on the part of the Army.
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