The way I understand it, the Type 93 'Long Lance' torpedo was much deadlier than American torpedoes, because of it's greater speed, range, damage, and difficulty in spotting it. However, damage to the volatile torpedoes could sink destroyers carrying them.
The way I see it, carrying oxygen torpedoes nullifies this weakness, since damage severe enough to detonate the torpedo would down the aircraft anyway, while improving survival rates by keeping the torpedo bombers further from Allied AA screens. Was it just impossible to make oxygen torpedoes small enough to be carried by single engine craft? It just seems strange that they wouldn't play their torpedo advantage to the hilt.
The Japanese did develop an experimental oxygen-propelled aerial torpedo, the Type 94 in the early 1930s in parallel with the oxygen-propelled Type 93 and Type 95. The Navy Technical Arsenal found that the Type 94 was too complicated and maintenance- intensive for an aerial weapon. The main advantage of an oxygen torpedo- range- was not nearly as important for aerial attacks, especially since aircraft often lacked the sophisticated and heavy fire-control equipment surface ships and submarines possessed to successfully carry out an attack at distance. Although the Yokusuka and Nagasaki Arsenals produced between 100-200 Type 94s, the Japanese soon went back to conventional aerial torpedoes. The IJN would not revisit the possibility of oxygen aerial torpedoes in no small part because its standard aerial torpedo, the Type 91, gave sterling performance. The Type 91 was superior in performance to its American counterpart at the start of the Pacific War and their anti-roll stabilizers allowed the torpedo to better hit their target. The only serious wartime modifications of the Type 91 was replacement of bronze parts with steel and minor alterations that eased production and boosted performance, with the resulting simplified torpedo, the Type 4, entering production in 1944.