What prompted Datsun to change its name to Nissan?

I believe that what really happened, was that Datsun channged its name BACK to Nssan. When Nissan was first exporting cars to the United States, there were strong concerns that World War II was still rather prominent in the minds of Americans. The car company had a concern, that the name Nissan would remind buyers of Nippon, which as you may know was a major manufacturer in the Japanese war machine. They changed the name to Datsun thinking that it would invoke less negative conotations.

On a tangent, this reminds me of a bad joke I heard years ago about how Datsun got its name:

The Nissan executives argued long and mightily about what to call the cars they were importing to America. Finally, one executive suggested that they contact the Germans for assistance. His thinking was that the Germans were very good at coming up with names. So...the Japanese executives sat down with a German marketing firm and explained their predicament. The Gemans mulled it over for a while and decided to ask some questions about the cars. First they asked about the different varieties of cars, the power trains and gas mileage. Then they asked about the design team and manufacturing process. Unable to restrain himself from bragging, a Japanese executive told the Germans about Nissan's innovative new manufacturing process. He bragged that from design to finish product only takes three days. The Germans were clearly impressed. One of them said "Dat soon?" (That soon?), hence the name.

I know, I know...not a great joke, but I just reprinted it! Someone else made it up!

Nissans were sold under the Datsun name only in the US and Canada. The name change is discussed in some detail at http://www.zcca.org/pages/ZCarsZhistoryDatsuntoNissan.htm .

Apart from considerations of presenting a unified global image, some Datsuns, like the 510, had terrible reputations for having shoddy bodies that rusted out in short order. The name change has been seen by some as distancing the image of rusty Datsuns from that of a 'new' and improved product: the Nissan. Nissan was not the only manufacturer having problems with inferior bodywork resulting from engineering cost-cutting, as legions of Ford owners from the era will testify. Biodegradable: thy name was automobile.

As a retired employee I can shed some light here. Datsun was a car manufacturer which was acquired by Nissan which was if I recall correctly was in the weaving loom business. When Nissan decided to enter the USA market they did think it better to use the Datsun name to avoid injury to the Nissan name in the event of a business failure. I questioned the wisdom of dropping the Datsun name but was told that Nissan wanted to unify its image in America and the world so that the good reputation of Datsun automobiles would transfer to the Nissan name and then to other Nissan products coming to America, medium duty trucks, outboard motors etc. I still think the Datsun by Nissan logo should have been enough.

As a retired employee of Nissan from 1962 to 1997 and a "Regional Manager" at the time, I can remember the name change being announced. It was due to the United States being the only country marketing the cars as "Datsun". This created confusion in the financial world and raising capital was the issue.
We often said, we would all be retired before the name Datsun would be forgoten. (Guess we were right!) Our cars and trucks carried both name plates for a few years however the ad's and all literature changed to Nissan.

Could be the name Datsun reminded everyone of a dog.