The real sinking of the Panay resulted in three crewmen killed and many more wounded. In this timeline, more men were killed causing a much deeper rift between America and Japan.
On December 12th, 1937, the USS Panay was docked in the Yangtze River, south of the Chinese capital Nanjing. Japanese planes attacked and sunk the boat with the loss of half the crew. An outraged America demands something be done and the US freezes Japanese assets and places an embargo on Japan. Japan is upset at the embargo, many materials Japan needs come from the US, in particular 90% of Japan's oil. Attempts at negotiation fail to prevent the embargo from going into effect and four days after the start of the embargo war-planning meetings begin. The planners know that Japan has about a year and a half of oil and that another source must be found. They settle on the Dutch-held territory of Indonesia, a successful operation would also require occupying all American bases that could threaten the attack. A simultaneous assault on the Philippines, Guam and bases in China are planned. The next issue is that of the US Pacific Fleet. The Japanese war plans call for a Tsushima-like decisive battle to allow free access of the Pacific. Japan's Admirals want to weaken the American main fleet before it arrives at a pre-determined area to be destroyed, the preferred area is somewhere between Kyushu and the Marianas. Clearly with no way to get battleships or carriers to attack Pearl Harbor or San Diego, the high command plans to mine one the two US main naval bases then send a force of submarines to pick off valuable warships. After three months of negotiation with only worsening relations, the high command authorizes the plan to proceed. A squadron of four I-121 class mine layers departs from Tokyo Bay, ahead of twenty more submarines to be stationed in Hawaiian waters off the American base at Pearl Harbor and initiate an attack. The task force had two incidents that could have ruined the operation, one when an I-122 was almost run down by a Chilean freighter while recharging her batteries, the second involved an I-122 nearly being rammed by the USS Worden 20 miles from Honolulu, this was