Doesn't look like water damage to me either. Looks more like a short circuit or high current load causing the connector to overheat.
I guess if the connector spades are badly corroded it could cause a high resistance and result in what you see.
It's possible that the previous owner had fuses blowing because of this so just chucked in a big fuse to get around it.
After repairing this problem I would suggest checking all the other connectors and cleaning with Duck oil (not wd40) or acf 50 to prevent any future problems.
But since the wire is stripped at the tip, if water got there, wouldn't it short-circuit?
So, by cleaning all connectors I would lower their resistance and prevend them from overheating, is that it?
It's surprisingly difficult to short circuit something with water unless you submerge it or pour on a cup full, corrosion over time causing resistance is usually the result of water ingress
Yes, cleaning connectors and preventing future corrosion via Duck oil or ACF50 will lower the resistance (to within designed parameters) and prevent this from happening in the future.
I do this globally every 2 years and every year just before winter on exposed or important ones like the main relay and the two connector blocks on top of the radiator (Fazer
.
I cover 20000 miles/year in all weather and cannot stress enough the need to properly maintain the electrical system and having a few spares makes an unexpected breakdown a lot less stressful.
I always keep a main relay, starter relay and flasher relay on hand just in case but that's just me as I also keep a full set of chassis bearings ( wheels, swing arm and headstock) chain and sprockets and a set of fork seals and spare wheels with tyres, just makes life so much less stressful.