Sort of. Press was very heavily censored, so for example the Rape of Nanjing would not have been reported in the Asahi Shinbun or anything.On the other hand, a whole lot of soldiers went to China (around 1 million if I'm remembering right) and not all of the ones who came back were circumspect about what they'd seen. So yes, people were undoubtedly aware to a degree.

The question about their reaction is fundamentally unanswerable. Japanese reactions ran the same gamut as the ones you see in the US towards things like the bombing of Dresden; from "serves them right" to "that's unfortunate, but it's war" to "that's unacceptable". As far as I know there were no opinion polls on the subject -- I can't imagine one being allowed by the press censors -- so there's no real way to get a pulse of the nation on the subject.

It's hard to say. Japanese press covered the war extensively; there were many journalists/photographers/filmmakers sent to the front lines. Asahi Shimbun had 600 reporters on the front lines, and had its own planes to get information from the front back quickly for example. Asai Tatsuzo, a filmaker on the front lines, recalled that movie theaters showed "only newsreels, just war." The footage was all very positive regarding Japan though; they wouldn't have shown anything that presented Japanese actions in a negative light. Hata Shoryu, a writer for the Asahi Shimbun, recalls that when he was hired by the paper in 1940 it was "ultranationalistic... more jingoistic and militaristic" than what he'd experienced in the military. He states that the reporters "came to believe that promoting and conducting the war was their obligation." One housewife in 1943 wrote in her diary that as war reporting was becoming increasingly obscure, she had to use her intuition more and more when reading the papers and "couldn't help but feel contempt for the authorities who treat us as though we were stupid." So while the media did have to start reporting on Japanese defeats towards the end of the war, they wouldn't have reported on war atrocities.

That being said, there are some references to citizens being aware of wartime atrocities in diaries and memoirs. I've listed the ones I've been able to find.

Ume Yasuzo, a schoolboy, recalls that he had heard in 1941 that his new principal had belonged to an army unit that had massacred chinese prisoners of war and burned them with kerosene.

Abe Hoichi, a former librarian, recalls that though seditious books were seized by the government and locked up, he used to sneak them out and read them. He remembers that a monthly police review he was sometimes able to access included criticisms of yasukuni shrine, reports of Korean resistance, and and antiwar/antimilitary measures.

On the other hand, many had no idea. Okazaki Junko, a third grader in 1945, recalls staying in an inn after Japan's surrender and listening to former Japanese soldiers reminisce about the atrocities they had committed in Nanking. She remembered waving a flag in a parade to celebrate the fall of Nanking and was "so shocked by what she had heard that she couldn't sleep at all that night."

So while a lot of Japanese citizens (especially adults) privately didn't believe the propaganda in the media, it still would have been hard for them to get information about the atrocities.