Taiwan was ceded to the Emperor of Japan by China in perpetuity on the Treaty of Shimonoseki in 1895, and was incorporated into an integral part of Japan.
Pursuant to Article 2(b) of the Peace Treaty in 1952, Japan renounced all rights over Taiwan. However, the obligations for indigenous Taiwanese subject remain with Japan.
While permanent occupation is unlawful, unpleasant politics between the Chinese on Taiwan and the PRC have taken place by formal reconciliation in 2010.
The US is the principal occupying Power upon Japan as per the Treaty. The US President has absolute authority to restore normality of Taiwan by returning it to the Emperor of Japan as it had once done with Okinawa in 1972, for the ultimate security of the region.