A Mw 7.1 earthquake off the north coast of New Guinea, generated a locally very destructive tsunami at 08:49 17th July 1998 UTC (6:49 PM local time). More than 2189 people died, and no structures were left standing along 19 km of coast. A reconnaissance team from the N.Z. Society for Earthquake Engineering visited the area a month after the event. Over three days, they examined effects of the tsunami on structures and landforms, measured profiles and sampled deposits. A fast moving wall of sand-laden water left fishing nets and other detritus in trees up to 17.5 m above sea level. Concrete was stripped to the reinforcing, and some trees were ripped out and carried more than a kilometre. The team saw evidence of new subsidence of -300-400 mm on the landward side of the spit fronting Sissano Lagoon. The site is in an active sedimentary basin, the Aitape Trough with 4,500-m thickness of Neogene sediments, between the Bewani fault zone and the Wewak Trench. The area may have subsided 3 times this century. In situ stumps of drowned trees in the lagoon record one of the earlier events. The low-angle Harvard University CMT solution (Mw 7.1, depth -6.0 km, -10° landward dip on fault with northward displacement) is consistent with the tectonic setting and pattern of aftershocks. Elastic modelling of the energy release with -2 m horizontal displacement over 600 km2, suggests -400 mm subsidence (landward) and -600 mm uplift (seaward in >3 km water depth). The team suggests that convergent flow of the displaced water into the area of subsidence focused wave energy on the coast and generated the locally very high wave. The spit fronting Sissano Lagoon is unsafe for habitation. There is potential for coseismic coastal subsidence to focus tsunami in other areas with similar tectonic settings. This potential suggests that both eastern and western New Zealand coasts have a serious hazard from local tsunami that is presently underestimated for the western coastline because of the lack of historical occurrences.