Entering Sei'an City, Amaterasu and Issun will notice an acrid mist covering the capital. Jump down into the canals throughout the city and collect all the treasures there (this must be done before talking with a man at the northwestern corner of the canal branches). After each and every corners of the canal system has been searched for treasures, talk to said man at the northwestern corner of the canals, then agree to help him with restoring the water to Sei'an City's canals. After finishing that, use Crescent to bring up the night (or renew the night if it is already nighttime), then scavenge around the city for white columns of light projecting up. After all these treasures are obtained, go to the Tools Dealer at the left of the city's entrance and buy the Blinding Snow fishing rod, sell the obtained treasures for extra Yen to buy the rod if necessary. Now proceed through the gate at the north of the quarter and enter the Aristocratic Quarter.
Move along the large Gojo Bridge connecting the two quarters of Sei'an City to where the bridge ended. Talk to Benkei there, who has been dreaming of catching the legendary living sword from the waters of lake Beewa. Give him the Blinding Snow, then after catching two fish, the "living sword" will emerge. However, catching it will only reveal that it is a cutlass fish, but Benkei still lowers the bridge. Proceed to the building on the far end of the bridge with a crowd in the yard, but Amaterasu is stopped by Waka. After a conversation about the mist covering Sei'an and a tip in dispelling it, enter the building ahead. There, talk to the priestess, who introduces herself as Rao, and at her request, look for her lost Prayer Slips. Proceed further into the Aristocratic Quarter by the door at the back of the office, remember to open the two treasure chests at the sides of Rao's desks before going. Once out, move over the small bridge ahead and get through the gate at the right of the large yard to enter the Imperial Palace, the residence of the Emperor. There, at the right of the large gates that are closed shut, is Rao's lost stack of Prayer Slips. Grab it, and listen to the guards' conversation about their suspicion in the Emperor. Return the Prayer Slips to Rao, and agree to help her reclaiming the lost Fox Rods. Then, return to Ryoshima Coast and get to the peninsula there, where the Moon Turret is, and use Holy Eagle to get onto it. There, use Crescent to bring out the moon and causing the water in the Lunar Lagoon to recede, revealing the entrance to the haunted Sunken Ship.