All sides had ample supplies of poison gas - and all knew that if they started using it, the other side would be justified in doing the same thing. Thus it would not be any net benefit in most cases.

You also under-estimate how much gas you need to actually blanket a region with it. Most soldiers in ww2 were equipped with basic chemical warfare protection gear, and training on what to do in case of a gas attack was standard in most basic traning in armies of the era.

Gas is also often dangerous after it has dissipated. It is taken up in water, plants, clothing of dead soldiers, in damp mud and water (mustard gas, for example, forms an acidic compound with water and can remain for a long time).

Any terrain covered with gas that you want to use yourself (such as the Iwo Jima airfield) would have to be cleared from any residue, a dangerous, laborous and time-consuming task.

Chemical warfare is also highly dependent on weather conditions and needs its own train of logistics and experts in warfare. In most cases, conventional warfare could do the job quicker and cheaper, and the bloody mathematic of lives versus time is not always resolved to the favour of those that would otherwise die.

The book 'A Higher Form of Killing' - a history of gas warfare suggests that Hitler, having been caught in gas attacks in WW1 was reluctant to use such weapons despite the fact the Nazis had developed nerve gas, which the allies had no idea of and no counter for. On D Day most troops didn't even have gas masks, let alone the greater amount of protection nerve gas would require. ...

Part of the reason is that between the First and Second World Wars, the use of poison gas became widely seen as immoral (because there were many people who had seen and survived exposure to chemical weapons firsthand — including Hitler himself) and was outlawed in international law.

The Geneva Protocol of 1925 (formally: 'Protocol for the Prohibition of the Use in War of Asphyxiating, Poisonous or Other Gases, and of Bacteriological Methods of Warfare') came into force in 1928 — almost all of the major world powers were signatories (ratified or otherwise) by 1930.

The Protocol reads, in part:

Whereas the use in war of asphyxiating, poisonous or other gases, and of all analogous liquids, materials or devices, has been justly condemned by the general opinion of the civilized world; and

Whereas the prohibition of such use has been declared in Treaties to which the majority of Powers of the world are Parties; and

To the end that this prohibition shall be universally accepted as a part of International Law, binding alike the conscience and the practice of nations;

That goes some way to explaining why chemical weapons weren't in wide usage. In general though, I think /u/vonadier's mutual-deterrence explanation is pretty compelling, as realpolitik; you don't want to fire the first shot, because that would likely invite retaliation in kind. In some ways, the point with chemical weapons is even more acute than with nuclear weapons — because unlike with a nuclear strike, you don't have even a distant hope of pulling off a 'knockout punch' with a first strike.

It's also worth pointing out that the Japanese did use chemical weapons (fairly extensively) during the Sino-Japanese War, though never as far as I know against western forces. Here's a good account of Japan's chemical weapons programme and use of these weapons. I would also suggest reading up on Unit 731 — the Imperial Japanese Army's chemical and biological warfare research division, which was found to be responsible for some of Japan's worst war crimes.