If you want a smaller tree @bwaynef plan is good.
If you want a bigger tree, I'd cut at blue line to continue the sinuous trunkline.
Also if those exposed roots are alive I'd definitely try to get them covered.
Nice juniper!
Andrew Robson has made some fairly respectable forests by sowing seeds in flats and eventually removing unwanted, or trunks in the wrong positions,
then allowing some to extend and get bigger and conversely restricting the ones that need to be smaller.
Bill Valavanis has been teaching forest...
@MACH5 has some great posts here detailing how to heal wounds such as these, essentially you remove all of the rotten/soft/punky wood, fill with epoxy or concrete, then periodically
activate the callous tissue edges adjacent to the wound by gently scraping to expose the cambium and treating...
Looks like an interesting job, glad you are recovering from the unfortunate health issues.
@Hartinez posted a hinoki a while back that he carved to disguise a graft, not the same situation as yours but maybe food for thought?
https://www.bonsainut.com/threads/b-b-hinoki.50817/
How about halfway between your red and yellow chops? make the branch that curves up sharply your new leader.
Agree the yellow chops are not ideal, already has reverse taper up there, scars may heal eventually but the resulting healing would likely cause more swelling.