I have a lot of respect for Germany's honest portrayal and study of its past. It is a rarity, perhaps singular.
You might want to check out the new podcast Day X. It's about resurgence of far right extremism in Germany going on right now. Sadly, the same thing seems to be happening in my country (US).
https://www.nytimes.com/2021/05/19/podcasts/far-right-german...
Of course both sides committed atrocities in war. But only one side committed mass genocide on an industrial scale.
The attacking party holds the moral responsibility for what is required to stop them.
If you have to kill all the civilians supporting the industrial side of the war in order to stop the war machine supplies (whether in Nazi Germany or under the Empire of Japan), the moral responsibility rests with the party that initiated the war.
Your moral duty as a defending nation is not to trade your people's lives at a equal proportion so that you feel great about not killing too many people. It's to make the attacking party stop, capitulate, give up, surrender their efforts, and that is all. If that requires killing their civilians at a 100 to 1 ratio, that is entirely morally rational and just. The guilt of those deaths entirely rests with the attacking nation.
Which is also not the same as saying that the defending side should kill as many civilians as possible, just to do it. It means they're absolved of civilian deaths on the attacking side as a concern morally, so long as the civilian deaths serves the purpose of helping to end the war.
It's absolutely wrong to attack civilians, like the allies did in numerous bombing campaigns in Germany and Japan.
There is no point getting depressed from one's ancestors past - if one looks in the past far enough, there will be probably something utterly horrible that given nation/tribe/group did to somebody innocent. Basically all western european democracies fall into this category, and many, many other nations too.
Don't forget about it by any means, tech your kids as I will do, but don't put emotions into this just because your nation was the culprit. There were similar things happening to innocent civilians en masse in the past elsewhere. Genocides are not an invention of Germany or 20th century, life was often pretty horrible and violent in the past.
Time and entropy (empires dissolving or population groups migrating) definitely diffuse the responsibility for a horrific act. Of which there are many in history. But this specific thing happened in living memory, was performed by an organization that still exists (a German speaking nation state, with almost the same borders as before), and by people the OP knows personally. In fact, it's a very wealthy nation that OP has gained a lot of advantage from living in. It's subjective and graduated, but I don't think it's been nearly "long" enough that the Holocaust just background noise next to all other events that have happened in human history.
Modern Germany is awesome btw. Really respect how they've reckoned with this awful time in their history.
I am very sorry what your grandfather had to endure and I am happy he survived. Though it doesn't change the past I will make sure that my children and grandchildren will remember what happened in order to prevent anything like that happening in our lifetimes again.