How does the SQ Waitlist work?

You are right, it is priotised by a queue system and determined firstly by (i) Krislfyer member status, followed by (ii) the time when you booked yourself into the waitlist (the fasteryou do so the better). It is similar to a waitlist. The waitlist queue will be cut off 2 weeks before the flight date

That said a flight slot tend to open up 350 days before the flight itself. Therefore plan your trips way in advance. In addition, try to book a single seat as SIA offers single seat a better chance of getting their desired seat.

So far I am queueing for a japan trip. I have been waitlisted for 1 month with no success till now​​​

It is as you suggested - redemption waitlist is unfortunately not a straight First In First Out queue.

The only thing I have heard from some of the customer executives is whether FOR SURE I wouldnt be able to get a flight. That atleast helps you to plan for worst case scenarios