As the topic of the causes of the Japanese surrender has been covered in the past, this question is more about why in particular Operation downfall was considered a likely outcome given the inability for the Japanese nation to meaningfully wage war by 1945. Was the Naval blockade and the resource shortages considered insufficient to invoking Unconditional surrender that a costly land invasion must be pursued against a protracted Naval blockade against a nation that no longer had the power to contest the seas at all?
The strategy that the US employed in the Pacific from Coral Sea to Nagasaki was really based on a strategy decided on by US war planners in 1932. US war planners had realized that Japan was a threat in the Pacific after the Russo-Japanese War in 1905, and had shortly thereafter began to plan how they would fight a war against Japan if necessary. At the time it was called War Plan Orange, but would eventually evolve into the Rainbow Five plan that the US employed during the war. While several strategies were considered between 1907 and 1932, War Plan Orange settled on this plan that the US would eventually employ which consisted of three phases:
In 1932, no one understood how bombardment (both aerial and naval) would evolve and how devastating it would be to civilian populations. They probably should have come to this conclusion with the escalation of events in Abyssinia, Spain (including Guernica and Barcelona,) Shanghai, London, and Germany (to include Dresden and Hamburg,) and the fire bombings in Japan. It really wasn't addressed in international law until 1977 with Protocol I of the Geneva Conventions.
It was certainly apparent in early July of 1944 to both Japan, the US, and its allies that Japan had lost the war with the fall of Saipan. This caused the fall of the Tōjō cabinet in Japan, and forced the Imperial Japanese Army GHQ to begin investigating a route to achieve a favorable end to the war. Inexplicably, they arrived at the same plan that they had started with to win the war, which was to win a victory that was so costly for the Americans that they would sue for peace on favorable terms. The first site for this major victory was the Philippines, and after that it became Okinawa. With the fall of Okinawa and Iwo Jima it became Kyushu.
By this time, the Allies had conducted approximately thirty amphibious invasions in the Pacific theater and the Japanese had not repelled a single one. The Emperor had obviously had doubts that the next invasion would finally be the great victory he was promised, especially after a tour of defensive preparations which included bamboo spears and crossbows.
The US on their part certainly began to have doubts about an invasion of the Home Islands. Nimitz especially was horrified at the loss of Naval personnel at Okinawa. Ships could be repaired and replaced, but a sailor couldn't. All of the most important Japanese codes had been broken including their diplomatic code (MAGIC,) their naval code (JN-25,) their merchant marine code (or Maru Code,) as well as the main army code. IJA transmissions began to show that the planned invasion force of 600,000 men (an invasion force larger than the one at Normandy) would be outnumbered 3/2. MacArthur didn't believe the numbers and wanted to go forward, but Marshall began to show doubts and look for alternatives.
Could the US have simply starved the Japanese into submission? In retrospect, the answer is obviously yes. Honshu, where most of the Japanese population resided, had long been starving and relied on rice from Hokkaido and Korea which had been effectively cut off. From the US perspective, they had no desire to refight this war in 15-20 years which was a lesson learned the hard way after WW1. There was no scenario where a negotiated peace was acceptable.
The US could have starved the Japanese into submission rather than invade, but it would have come at a cost. The cost would have been measured in the lives of both POWs and Japanese civilians. For US military leaders, the pressure wasn't only to avoid casualties but to end the war as soon as possible and return to civilian life. Ultimately the decision rested with the government of Japan to end the war despite the fact that in their minds this meant they would have to swallow their pride and for the first time in their national history admit defeat.
Sources:
Wetzler, Peter, Imperial Japan and Defeat in the Second World War: The Collapse of an Empire.
Miller, Edward S., War Plan Orange: The U.S. Strategy to Defeat Japan, 1897-1945.
Frank, Richard B., Downfall: The End of the Japanese Empire.
There are answers by /u/restricteddata and /u/wotan_weevil and /u/t-o-k-u-m-e-i/ in Did the dropping of the atomic bombs on Japan actually save lives?, another version of your question.