u/Lubyak has an answer here from a few months ago that nicely covers this issue. u/DBHT14 also touches on it in the beginning of his answer here. And u/kasirzin has another good answer here.

The short answer: The Japanese weighed whether they could seize the territories they were after in Southeast Asia and the Pacific, like the Dutch East Indies, Malaya, Singapore, etc., without attacking the Americans and hoping to keep them out of the war. The decision was that Japan could not afford to bypass the Philippines and hope the US would not use its military forces there to interfere with Japanese operations and interdict supply lanes. The Philippines would have to be attacked, meaning the United States would be drawn into the war.

Both the US government and the Japanese operated with incomplete and sometimes incorrect information during negotiations in 1940 and 1941. There were competing factions in both governments, some more belligerent than others, some more willing to make a deal. Both sides made mistakes in diplomacy, either in miscommunications or in policies.

However, even with those caveats, the fundamental situation was that Japan was unwilling to abandon its territorial ambitions in Asia, including its war in China and its efforts to wrangle colonies away from European powers. The Americans were unwilling to watch and allow Japan do this, particularly while it was allied with Germany and Italy.

The final Japanese proposal in negotiations, delivered on 20 November 1941, called "Proposal B," after "Proposal A" was rejected by the Americans a few weeks earlier, more or less sought to return the situation to where it was in summer 1941 before Japan expanded into southern Indochina. Japan offered to remove its troops from southern Indochina into northern Indochina in exchange for the US resuming oil shipments to Japan and unfreezing Japanese assets. The Japanese also wanted the Americans to "refrain from such measures and actions as will be prejudicial to the endeavors for the restoration of general peace between Japan and China." Throughout 1940 and 1941, Japan had been pushing for the US to stop supporting the Chinese. The wording of this seems a bit softer than previous proposals, but it's clear that Japan wants the US to stop helping the Chinese fight against the Japanese.

These were among the most significant concessions Japan had been willing to make in negotiations, but it still wasn't acceptable to the United States, which had never wanted Japan in Indochina at all (northern or southern) and wanted Japan to withdraw from China. Still, the Americans, understanding how tense the situation had become, prepared a response known as the "Modus Vivendi," (scroll down here) that also included significant concessions on the American side. Significantly, the US planned to allow some oil and other goods to flow back to Japan again, contingent on Japan pulling its troops from southern Indochina out of the region entirely.

However, as the Americans were debating the Modus Vivendi, military intelligence caught wind of Japanese troop transports that were on the move in the region. Here, the Americans were trying to negotiate with the Japanese to pull back from territory they had already grabbed, and they found the Japanese preparing to grab more territory. This revelation led the Americans to axe the Modus Vivendi, which was never delivered to the Japanese. Instead, they countered on November 26 with what came to be known as the "Hull Note." It's a hardline response from the Americans who believed the Japanese to be negotiating in bad faith anyway.

A few highlights:

• Instead of just the US & Japan negotiating a deal, the Hull Note states that any agreement must include "a multilateral non‑aggression pact among the British Empire, China, Japan, the Netherlands, the Soviet Union, Thailand and the United States." If the US & Japan had been unable to come to terms in a bilateral deal, it would have been basically impossible for a multilateral deal that was acceptable to all of those countries.

• "The Government of Japan will withdraw all military, naval, air and police forces from China and from Indochina." Pretty clear shift from the aborted Modus Vivendi.

• "Both Governments will agree that no agreement which either has concluded with any third power or powers shall be interpreted by it in such a way as to conflict with the fundamental purpose of this agreement, the establishment and preservation of peace throughout the Pacific area." This would have been aimed at the Tripartite Pact with Germany & Italy.

This is a hardline response, but there still wasn't much room for daylight between the canceled Modus Vivendi and Proposal B. Both sides made efforts at diplomacy, but there was little progress and they seemed to grow increasingly distrustful of one another. There were significant differences between the two sides that weren't going to be resolved at the negotiating table. The Americans had forces in Asia which could have struck at the Japanese if they had attempted to bypass those troops, and the Japanese calculated that it was better to try and neutralize them at the start. The alternative was that the Americans would have responded, even without being directly attacked.

To expand on /u/Myrmidon99's excellent answer, I want to focus a little on the domestic politics of Japan when it came to the United States entering the war.

The initial decision to expand Japan's war in Asia by attacking the European colonies in South East Asia took place in mid 1940, and--interestingly--was proposed by the Army rather than the Navy, with the Army hoping that it could exploit German victories in Europe as well as providing an opportunity to further isolate China and hopefully bring that war to an end. The Army, for its turn, had proposed attacking only Malaysia and the Dutch East Indies, avoiding a direct attack on the U.S. presence in the Philippines. However, the Navy was absolutely insistent that any operations in a southward advance would require war with the United States. Some of this was part of the Navy's strategic thought, which held that occupation of the Philippines was necessary to secure the supply lines from the resources of South East Asia as well as that the United States would certainly go to war to defend Britain in Asia, but domestic politics were also a major consideration. Quite simply, if Japan committed to the Southern Advance, the Navy would be in a much stronger position to demand massively increased allocations of resources to support its extensive building efforts, able to justify this reallocation due to the need to expand the fleet to fight the United States. However, if operations were only launched against the British and the Dutch, the former having most of its naval strength tied down in Europe and the latter with little naval strength at all, the Navy would have a much smaller role, as it would only be mopping up weakened colonial squadrons. However, war with the United States would require the whole strength of the Imperial Japanese Navy and extensive expansion. Thus, by insisting that the Southward Advance required war with the United States, the Navy secured a powerful bargaining chip in its ongoing struggle for resources with the Army. This also led to the Navy performing an awkward dance between demanding the Southward Advance include war with the United States, but also that the advance be delayed, as the Navy was uncertain about its abilities to actually win a war with the United States. Thus, the Navy wanted to delay the war to the south, while the Army wanted a quick and aggressive attack.

The occupation of the rest of French Indochina was in many ways a compromise between the Army and Navy, satisfying the Navy's demand that the outbreak of war be delayed while also providing the Army with some movement as part of the Southward Advance. However, there was still little agreement between the Army and Navy over what the next steps would be following the occupation of Indochina. Germany had invaded the Soviet Union in the summer of 1941, and the opportunity presented there had rekindled the hopes of some in the Army for a war with the Soviet Union, presenting additional time pressure on the Navy for when the Southward Advance could begin in earnest. The final details of the Southward Advance were not truly set in stone until the American asset freeze and oil embargo hit and Japan was fully committed to advancing southward.

Thus, was it a foregone conclusion for Japan that the invasion of South East Asia would require war with the United States? The Navy thought so, both for practical and political reasons. The Imperial Japanese Navy had built itself around fighting the United States and war with the United States was practically a matter of faith. The Army on the other hand at least wanted to consider the prospect of war against the British and Dutch without war with the United States. However, such a proposal was completely unacceptable to the Navy, and if the Army wanted the Navy to agree with the Southward Advance, it had to give in, and accept that war against the British and Dutch meant war with the United States as well.