Whether or not it was seen as a defeat or a liberation depended on your relationship with the British. As Andrew Selth in Race and Resistance in Burma, 1942-1945 (Modern Asian Studies, Vol. 20, No. 3 (1986), pp. 483-507), ethnicity came to play a vital role in deciding where you stood. In pre-WWII Burma, there already existed a divide between the majority Bamar and minorities such as Kayin, Chin etc., that was only to become worse during the actual war itself, incidents that Selth goes as far as to call a race war.

At this time, it's vital to understand what the majority Bamar people would gain from independence that the minority population wouldn't. The majority in the Burmese independence movement were the Bamar people. Why is this?

Many minorities came to feel protected under British rule. They had considered themselves oppressed under Bamar rule before the British conquest of Burma during the late 19th century and the Kayin people, for example, had suffered greatly. With the British conquering Burma, minorities found a refuge under their banner and found themselves with opportunities that they've never considered possible before, such as guaranteed political representation. The British, in turn, took advantage of this already existing divide between the majority and the minorities and considered the minorities as potential loyal subjects that could work as a counterweight against the majority. This meant for example that the British-Burmese Army was made up by minorities, not the Bamar that were considered ill-suited to be soldiers (along the lines of the 'martial races' in India in which some ethnicities were considered better suited as 'warriors' than others). This meant that the British-Burmese Army came to be seen as a tool of oppression by the majority Bamar people. Even in the struggle for independence was divided: the majority population stood in the forefront of the independence movements while the minorities, knowing that they'd be under Bamar rule, preferred to stay under British rule. Some of those who did support independence supported an independent state for their own minority group.

All of this comes together in 1942. With the Burma Independence Army marching into Burma with the Japanese army, more than 10,000 would join them before they reached Rangoon, the majority of them Bamar. The smaller contingent of Bamar in the British-Burmese Army that had been allowed in after 1935 mostly deserted to the Burma Independence Army. As villages, towns and cities fell under the Japanese, a series of outbreaks of racial violence between Bamar and minorities took place, with the Burma Independence Army executing minorities or in other ways maltreating them for simply being of a different ethnicity while minorities, in particular the Kayin, struck back against the Burma Independence Army with guerilla warfare.

To return to the original question, the local view of the Japanese invasion was divided and the invasion aggravated deep ethnic and racial strife that already existed in pre-war Burma. However, it would be wrong at this time to say that all Bamar supported the Japanese or that all Kayin, Chin or even Shan (some of whom were actually part of the BIA) supported the British in 1942. As Selth points out, "Ironically, many communities (both Burman and Karen) turned to the Japanese for protection against the rampaging soldiers of the BIA, and Karen counter-attacks."

Although matters would come to change over the following years, some of the post-war conflicts between minorities in Burma/Myanmar and the majority Bamar can be traced to pre-war Burma and that fateful year 1942.