One major episode came on 12 December 1937. During the USS "Panay" incident, the Japanese military bombed and sank the American gunboat "Panay" while it was anchored in the Yangtze River outside Nanking in China. Three American sailors were killed. Japan and the United States were at peace. The Japanese claimed that they had not seen the American flags painted on the deck of the gunboat and then apologized and paid an indemnity. Nevertheless, the attack outraged Americans and caused US opinion to turn against the Japanese.