The same reasons why the response to Hitler's aggression was tepid. Nobody wanted war, nobody was in a position to make war, and people were hopeful that everything would just somehow work out for the best.

An interesting case study here is the response to the "Mukden Incident". In 1931 a railway line owned by the Japanese South Manchuria Railway company was attacked by a small dynamite explosion. The explosion didn't even destroy the track, however the incident was used by the Japanese government as an excuse to occupy Manchuria. The British government, having several interests in China and the region in general, investigated the incident through the auspices of the League of Nations (producing the "Lytton Report") and discovered that the attack had been committed by the Japanese themselves, and not Chinese dissidents. The fallout from that revelation led to the Japanese withdrawing from the League in 1933, and no other consequences.

The world powers at the time were very leery of breaching the careful balance of power that had been setup by the post-WWI diplomatic systems and the Washington Naval Treaty. They wanted to avoid new direct conflict or arms races between major powers in substantially the same manner that direct conflict between nuclear powers was undesired in the 20th and 21st centuries. The recent example on everyone's minds was, of course, WWI, and the desire was to avoid similar experiences at all costs. There was little perceived advantage to pursing direct conflict with Japan over the occupation of Manchuria, especially given the tremendous costs it would have taken to do so. It was yet another indication of how toothless the League of Nations was in practice. Only a few years later (in 1936) Germany would remilitarize the rhineland, without substantial repercussions.

The US did undertake a series of efforts to work against the Japanese occupation through the 1930s, including increasing levels of trade restrictions, supplying and aiding Chinese forces, etc. which would eventually bring Japan and the US into direct conflict in 1941. But by then, of course, the war had proceeded into a much hotter stage across the globe.