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On April 21, 1945, Inouye was grievously wounded while leading an assault on the heavily defended Colle Musatello ridge near San Terenzo, Italy. The ridge served as a strongpoint of the German fortifications known as the Gothic Line, the last and most unyielding line of German defensive works in Italy. During a flanking maneuver against German machine gun nests, Inouye was shot in the stomach from 40 yards away. Ignoring his wound, Inouye proceeded with the attack and together with the unit, destroyed the first two machine gun nests. As his squad distracted the third machine gunner, the injured Inouye crawled toward the final bunker and came within 10 yards. As he prepared to toss a grenade within, a German soldier fired out a 30 mm Schiessbecher antipersonnel rifle grenade at Inouye, striking Inouye in the right elbow. Although it failed to detonate, the blunt force of the grenade amputated most of his right arm at the elbow. The nature of the injury caused Inouye's arm muscles to involuntarily squeeze the grenade tightly via a reflex arc, preventing his arm from going limp and dropping a live grenade at his feet. This injury left Inouye disabled, in terrible pain, under fire with minimal cover and staring at a live grenade "clenched in a fist that suddenly didn't belong to me anymore."
Inouye's platoon moved to his aid, but Inouye shouted for them to keep back out of fear his severed fist would involuntarily relax and drop the grenade. As the German inside the bunker began reloading his rifle with regular full metal jacket ammunition to finish off Inouye, Inouye pried the live hand grenade from his useless right hand with his left, and tossed it into the bunker, killing the German. Stumbling to his feet, Inouye continued forward, killing at least one more German before sustaining his fifth and final wound of the day in his left leg. Inouye fell unconscious, and awoke to see the worried men of his platoon hovering over him. His only comment before being carried away was to gruffly order them back to their positions, saying "Nobody called off the war!" By the end of the day, the ridge had fallen to American control, without the loss of any soldiers in Inouye's platoon. The remainder of Inouye's mutilated right arm was later amputated at a field hospital without proper anesthesia, as he had been given too much morphine at an aid station and it was feared any more would lower his blood pressure enough to kill him. The war in Europe ended on May 8, less than three weeks later.