Yeah, there was clearly an element of victor's justice in the post-war trial. I remember reading the story of a submarine captain being accused of sinking civilian ships without warning (or liners?) and getting off after pointing out the Allies had done the same thing.
Admirals Raedar and Dönitz. If I recall, several in the US Navy were opposed to introducing those charges precisely for this reason; I know that at the least, Nimitz submitted an affidavit in support of unrestricted submarine warfare to the trial of the latter.
That said, regarding the Japanese firebombing, there was indeed a very strong cottage industry even pre-war in not only Japan, but also India and China compared to Europe or the US which led to a strong decentralization of production relative to European cities, though it was still focused around the major factories. Indeed, one of the effects of the early precision bombardment had been to compel the Japanese to further accelerate the dispersal of factory production, which did reduce efficiency. It is overstating matters more than a little bit to claim that "every single residence in Tokyo was a factory", however. At the very most, it could be stated that "every single residence in Tokyo could conceivably be concealing industrial work." Shonus is, however, entirely accurate in his assessment of the early precision raids. Early raids failed embarrassingly with relatively heavy losses compared to later incendiary runs; heavy winds and poor weather made accurate bombing exceptionally difficult over the Japanese isles due to both driving bombers off course and interfering with target acquisition. Taking a look at the raids conducted under Hansell before "Bombs Away" LeMay, the primary issue is consistently those very same "high winds and heavy cloud cover". The only raids to successfully dent Japanese production during Hansell's tenure were also conducted with incendiaries, so it cannot simply be tied to a Hansell/LeMay dichotomy. The primary reason incendiaries worked so effectively against Japanese cities was actually due to differences in the construction of Japanese cities when contrasted with European cities. Though I expect most in the thread already know this part, the primarily-wooden construction of Japanese cities meant that fires were more difficult to control, and also that near-misses could still effectively cripple production through the spread of fire. However, what is critical to note is that as a consequence of this, the accuracy problems that plagued precision bombing were no longer as relevant. Further, even utilized against military targets, there would inevitably be knock-on effects as the fires would not spread to the factories alone, but rather through the entire city.
However, I'm not certain I can agree with the assessment that the target was production, and production alone. There were multiple reasons: Japanese production dropped more precipitously, certainly, and it's just as critical to remember that the shift to firebombing also saved the lives of American pilots. Due to the differences in approaches, primarily that precision bombing required daytime approaches while firebombing could be conducted under cover of night, firebombing was by and large safer for the bombers and their crews. It is difficult to condemn commanders for preferring to save their own subordinates' lives over those of enemy combatants and supporters. I do not believe the terror element can be entirely discounted, as well; the use of propaganda leaflets, cited earlier as an attempt by the Americans to save Japanese lives, was actually utilized as a weapon to spread terror by their use over cities that were not actively being firebombed in addition to serving as a way to assuage American consciences under the notion that it might work to convince some civilians to leave the cities. However, the practical question was not incendiaries or precision bombardment: it was incendiaries or allowing the Japanese Home Isles industry to continue military construction unmolested. Between the two, I cannot condemn the American high command for choosing to wage the war rather than surrendering all initiative over the Home Isles to Japan out of some misplaced chivalry.
By the bye, the same weather issues above did haunt the atomic bombings as well, as the second bomb was actually almost thwarted by weather. Intended for Kokura, three successive bombing runs failed to make the target, and the run on Nagasaki was successful only due to a last-second break in the heavy cloud cover there; they didn't have the fuel to make a second try. Even with that, Bockscar burned so much fuel in the attempts that it literally lost engine power during landing.
EDIT: Reorganized a couple sentences to keep things a bit more coherent.