Admiral Tōgō had visited Tōkyō after the fall of Port Arthur, and by his natural modesty and force of character inspired the nation with an unbounded confidence in his success in the coming contest with the Baltic fleet. He avoided popular ovation, saying he had yet much to do, and came and went like a plain farmer. Leaving Tōkyō on February 6, 1905, the very day when, a year before, he led his fleet from Sasebo toward Port Arthur, he made every preparation to meet Rozhestvenski's ships. A few days before the latter's arrival Tōgō was convinced that in their attempt to reach Vladivostok they would make a dash through the Korean Straits, instead of going by way of the Tsugaru or La Perouse Straits, and kept his entire fleet at and near Masampo. At five o'clock in the morning of May 27 Tōgō's scouts reported by wireless telegraphy that Russian vessels were sighted near Quelpart Island. Thrilled by the news, all the divisions immediately turned to their assigned missions. The sea was overcast by a heavy fog and the waves were high from a sharp southwest wind. Two of the Japanese cruiser squadrons advanced toward the enemy, and, between 10 and 11 A. M., led him gradually toward the Japan side of the straits, and then at 1.30 P. M. joined the main squadron. The enemy's vessels were now visible in two main columns, the battleships to the starboard and the cruisers and coast-defenders to the port, and headed by the Jemchug and the Izumrud, and followed by a long line of smaller vessels, the entire formation extending over several miles. The vessels were painted black, with the funnels whitish yellow and the rims black, so that they were conspicuous on the sea, while the Japanese ships were light green and gray, and not so easily discernible as the Russian. Just before two o'clock Tōgō signaled to the entire fleet: "The destiny of the empire depends on this one battle; let everyone do his utmost." The battleship squadron under Tōgō's direct command and the cruisers under Kamimura pressed the enemy eastward, and, from a distance of 6000 meters, concentrated their terrific fire upon the foremost Russian vessels, while other Japanese squadrons attacked the enemy from the rear. The main issue was decided within an hour. The Oslabia, the Alexander III., and the flagship Kniaz Suvarov, caught fire and went out of action, as well as several smaller vessels in the rear. The columns of smoke wafted by the wind over the sea concealed the hostile fleets from each other's view, and the firing was suspended by the main squadrons at 2.45. Admiral Voelkersam had been killed, and Rozhestvenski himself wounded and transferred to a destroyer in an unconscious state, the command being assumed by Nebogatov. From three o'clock the Russian vessels made a desperate effort to flee northward, but were so fiercely fired upon that they turned south. Now the battle raged in several sections till sunset. The Oslabia, the Alexander III., the Borodino, and the Kniaz Suvarov, all battleships, and two special service boats, were sunk. At sundown the Japanese torpedo craft, whose work had thus far been secondary, took the field, and succeeded in throwing the enemy into a hopeless confusion, sinking the battleship Navarin and incapacitating the battleship Sissoi Veliki and the armored cruisers Admiral Nakhimov and Monomakh. The last three vessels sank the next day.
The fog lifted on May 28, and the main squadrons under Tōgō and Kamimura were near Ulung Island about 5.30 A. M., when a Russian fleet, consisting of two battleships, two coast-defenders, and two cruisers, were discovered heading northeast. The different squadrons completely surrounded the enemy near Liancourt Islands about 10.30, and Admiral Nebogatov soon surrendered, although the cruiser Izumrud alone escaped. In the afternoon two Japanese destroyers found and pursued two Russian destroyers, one of which, Biedovy, carrying the wounded Rozhestvenski, surrendered, and the other escaped. The cruisers Svetlana and Dmitri Donskoi, the coast-defender Oushakov, and a destroyer, were either sunk or driven aground, making the total Russian loss during the two days six battleships, one coast-defender, five cruisers, five destroyers, one converted cruiser, and four special service vessels. Out of the 18,000 Russian sailors, nearly 12,000 must have gone down with the sinking vessels. The Japanese lost only three torpedo boats and 116 killed and 538 wounded, but captured two battleships, two coast-defenders, and a destroyer. Of the Russian vessels which escaped, the cruiser Almaz and two destroyers reached Vladivostok, but a destroyer and two special service boats which got to Shanghai, and the cruisers Aurora, Oleg, and Jemchug, that went to Manila, were dismantled. Admiral Tōgō reported, in his characteristic manner, that the "miracle" of his victory was "entirely owing to the illustrious virtues of the emperor, and was beyond all human possibility," and that he could not but believe that "the comparatively small losses were due to the protection of the spirits of the imperial forefathers."
As soon as the decisive battle of the Sea of Japan was fought, Theodore Roosevelt, President of the United States, who had once before failed, in February, to induce Russia to agree to come treat for peace with Japan, renewed his effort to bring the belligerent powers together to a discussion of peace terms exclusively between themselves. In this effort he was supported by the French government and the German emperor. After preliminary consultations with Takahira and Count Cassini, the Japanese and Russian representatives at Washington, Roosevelt addressed the following note to the governments of St. Petersburg and Tōkyō: "The President feels that the time has come when in the interest of all mankind he must endeavor to see if it is not possible to bring to an end the terrible and lamentable conflict now being waged. With both Russia and Japan the United States has inherited ties of friendship and good-will. It hopes for the prosperity and welfare of each, and it feels that the progress of the world is set back by the war between those two great nations.
"The President accordingly urges the Russian and Japanese Governments, not only for their own sakes, but in the interest of the whole civilized world, to open direct negotiations for peace with each other. The President suggests that those peace negotiations be conducted directly and exclusively between the belligerents, in other words, that there may be a meeting of Russian and Japanese plenipotentiaries or delegates without any intermediary, in order to see if it is not possible for those representatives of the two powers to agree to terms of peace. The President earnestly asks that the Russian Government do now agree to such a meeting, and is asking the Japanese Government likewise to agree.
"While the President does not feel that any intermediary should be called in in respect to the peace negotiations themselves, he is entirely willing to do what he properly can, if the two powers concerned feel that his services will be of aid, in arranging the preliminaries as to the time and place of meeting. But if even these preliminaries can be arranged directly between the two powers, or in any other way, the President will be glad, as his sole purpose is to bring about a meeting which the whole civilized world will pray may result in peace."
The Japanese government responded, saying that Japan would open negotiations directly and exclusively with Russia regarding terms of peace. The Russian reply, at first given orally and then made with some reservation, was finally couched in substantially the same language as the Japanese. Japan appointed as her peace envoys Baron Komura, minister for foreign affairs, and Kogorō Takahira, minister at Washington. Russia's choice of her chief envoy first fell on Nelidov, ambassador at Paris, then on Muraviev, ambassador at Rome, but later was changed to Count Serge Witte, president of the committee of ministers. The new Russian ambassador at Washington, Baron Rosen, was appointed the second envoy of Russia. As for the place of the conference, neither Paris, suggested by Russia, nor Chifu, suggested by Japan, being acceptable to the other party, respectively, the two governments finally agreed upon Washington. Because of the excessive summer heat of the American capital, however, it was decided that actual negotiations should be held at the navy yard near the quiet historic town of Portsmouth, New Hampshire. The envoys were announced to arrive by August 1.
In the meantime, before the end of July, the Russian Island of Sakhalin, the southern half of which had till 1875 been claimed by Japan, was occupied by the Japanese forces, which also seized a few points on the coast of southeastern Siberia.
The envoys of the belligerent powers having arrived, they were introduced to one another by President Roosevelt on the Mayflower on August 5, and then proceeded to Portsmouth, arriving there on the 8th. They sojourned at the Hotel Wentworth on the small Island of New Castle near Portsmouth, whither flocked many curious summer visitors and more than a hundred newspaper correspondents from various parts of the world. The first informal meeting of the envoys was held at the naval stores building at the navy yard, but the actual business of the peace negotiations began on the following day. On that day Baron Komura presented, in writing, the entire list of twelve terms of peace, which are believed to have covered the following points: 1, Japan's preponderant interest in Korea, and the principle of the open door therein; 2, evacuation of Manchuria by the Japanese and Russian armies; 3, restoration of Chinese administration in Manchuria; 4, China's territorial integrity and the open door in Manchuria; 5, cession to Japan of the Island of Sakhalin; 6, surrender to Japan of the lease of the Kwan-tung district, containing Port Arthur, Dalny, and adjacent islands; 7, transfer to Japan of the railway between Port Arthur (and Dalny) and Harbin; 8, retention by Russia of the main Manchurian railway from Mandchourie to Grotekovo; 9, reimbursement by Russia of Japan's cost of war; 10, surrender by Russia of her war vessels interned in neutral ports; 11, limitation of Russia's naval power in the Pacific; and 12, the rights of the Japanese subjects to fish in the waters of the Siberian littoral. To these terms Witte gave a written reply on the 12th, stating his assent to some points, willingness to discuss some others, and absolute dissent from the rest. Then the envoys discussed the terms one after another, and, within six days, found themselves in agreement, in substance or in principle, on the first, second, third, fourth, sixth, seventh, eighth, and twelfth terms. As regarded the other four points, particularly the cession of Sakhalin and the payment of the war expenditures, the Russian envoy considered them as incompatible with the honor and dignity of the tsar's empire.
The conference now seemed to be ending in failure, when on August 18 occurred the visit of Baron Kaneko to President Roosevelt at Oyster Bay, followed on the next day by the invitation extended to Baron Rosen to come on from New Castle. Kaneko again called on Roosevelt on the 21st, while Meyer, American ambassador at St. Petersburg, had a long interview with the tsar two days after. The president was urging the two governments, through these various channels, to arrive at some compromise of their differences for the sake of peace. When Meyer had an audience of the tsar, the Japanese government had already accepted Roosevelt's suggestion for compromise by intimating its willingness to drop the demands for the surrender of the interned vessels and for the limitation of Russia's naval power, and to allow Russia to repurchase the northern half of Sakhalin, which was in Japan's military occupation, for 1,200,000 yen. The tsar, however, unequivocally declined to agree to this compromise, for he considered the proposed repurchase as an indemnity in disguise, to which he was opposed in principle. Despite Ambassador Meyer's repeated appeal, Nicholas II. remained firm, although—whether by his instruction or on Witte's own initiative is not known—the southern half of Sakhalin was offered to Japan. In the meantime, President Roosevelt appealed to Japan, until the deliberations of the privy councilors at Tōkyō resulted in the emperor's instructions to his envoys at Portsmouth to waive their demand for money and to accept the southern half of Sakhalin. This final concession, which at length made peace possible, was announced by Baron Komura at the morning session of August 29, and came as a complete surprise to Witte and to the whole world. The articles of the treaty were then drafted, and signed by the envoys on September 5.