The U.S. Fifth Air Force and the Royal Australian Air Force (RAAF) attacked a Japanese convoy that was carrying troops to Lae, New Guinea. Most of the task force was destroyed, and Japanese troop losses were heavy…. On 28 February 1943, the convoy – comprising eight destroyers and eight troop transports with an escort of approximately 100 fighters – set out from Simpson Harbour in Rabaul…. All eight transports and four of the escorting destroyers were sunk. Out of 6,900 troops who were badly needed in New Guinea, only about 1,200 made it to Lae. Another 2,700 were rescued by destroyers and submarines and returned to Rabaul. The Japanese made no further attempts to reinforce Lae by ship….
[After its February 28 departures] the convoy, moving at 7 kn (8.1 mph; 13 km/h), was not detected for several days because of two tropical storms that struck the Solomon and Bismarck Seas between 27 February and 1 March, but at about 15:00 on 1 March, the crew of a patrolling B-24 Liberator heavy bomber spotted the convoy…. 2 March…. Eight B-17s took off to attack the ships, followed an hour later by another 20…. Kyokusei Maru had sunk carrying 1,200 army troops, and two other transports, Teiyo Maru and Nojima, were damaged…. Yukikaze and Asagumo plucked 950 survivors…. broke away from the group to disembark the survivors at Lae….
By 3 March, the convoy was within range of the air base at Milne Bay… the weather cleared after they rounded the Huon Peninsula. A force of 90 Allied aircraft took off from Port Moresby…. Shirayuki was the first ship to be hit, by a combination of strafing and bombing attacks…. Shirayuki was scuttled. The destroyer Tokitsukaze was also hit and fatally damaged…. The destroyer Arashio was hit, and collided with the transport Nojima, disabling her. Both the destroyer and the transport were abandoned…. Fourteen B-25s returned that afternoon, reportedly claiming 17 hits or near misses. By this time, a third of the transports were sunk or sinking…. Garrett Middlebrook, a co-pilot in one of the B-25s, described the ferocity of the strafing attacks:
They went in and hit this troop ship. What I saw looked like little sticks, maybe a foot long or something like that, or splinters flying up off the deck of ship; they’d fly all around ... and twist crazily in the air and fall out in the water. Then I realized what I was watching were human beings. I was watching hundreds of those Japanese just blown off the deck by those machine guns. They just splintered around the air like sticks in a whirlwind and they’d fall in the water.
All seven of the transports were hit and most were burning or sinking about 100 km (54 nmi; 62 mi) south east of Finschhafen, along with the destroyers Shirayuki, Tokitsukaze and Arashio. Four of the destroyers – Shikinami, Yukikaze, Uranami and Asagumo – picked up as many survivors as possible and then retired to Rabaul, accompanied by the destroyer Hatsuyuki, which had come from Rabaul to assist. That night, a force of ten U.S. Navy PT boats – under the command of Lieutenant Commander Barry Atkins – set out to attack the convoy. Two boats struck submerged debris and were forced to return. The other eight arrived off Lae in the early hours of 4 March. Atkins spotted a fire that turned out to be the transport Oigawa Maru. PT-143 and PT-150 fired torpedoes at it, sinking the crippled vessel. In the morning, a fourth destroyer – Asashio – was sunk when a B-17 hit her with a 500 lb (230 kg) bomb while she was picking up survivors from Arashio….
On the evenings of 3–5 March, PT boats and planes attacked Japanese rescue vessels, as well as the survivors from the sunken vessels on life rafts and swimming or floating in the sea. This was later justified on the grounds that rescued servicemen would have been rapidly landed at their military destination and promptly returned to active service. While many of the Allied aircrew accepted these attacks as being necessary, others were sickened….
The battle was a disaster for the Japanese…. The Allies lost 13 aircrew, 10 of whom were lost in combat while three others died in an accident. There were also eight wounded. Aircraft losses were one B-17 and three P-38s in combat, and one B-25 and one Beaufighter in accidents. MacArthur miscounted, and issued a communiqué on 7 March claiming that 22 ships, including 12 transports, three cruisers and seven destroyers, had been sunk along with 12,792 troops….
Imamura's chief of staff flew to Imperial General Headquarters to report on the disaster. It was decided that there would be no more attempts to land troops at Lae…. Of the defeat, Rabaul staff officer Masatake Okumiya said, "Our losses for this single battle were fantastic. Not during the entire savage fighting at Guadalcanal did we suffer a single comparable blow. We knew we could no longer run cargo ships or even fast destroyer transports to any front on the north coast of New Guinea, east of Wewak."... After the war, Japanese officers at Rabaul estimated that around 20,000 troops were lost in transit to New Guinea from Rabaul, a significant factor in Japan's ultimate defeat in the New Guinea campaign.