You find out that Chairman McKraken seems to be leading an invasion of evil Yo-kai into the human world, but Lucas has a key...
Lucas and the Sacred Tree
Whisper says that Yo-kai need Lord Enma's permission to enter the human world, so the evil Yo-kai must have found some way around that.
Lucas arrives and admits that he can see and hear Yo-kai. You confess that you can, too. Lucas says that he has had a key since childhood, and he dreamt that you and he went to Yokai World on Mt. Wildwood using that key. He shows you the key and says that when he woke up today, he felt that he had to go to Yo-kai World, no matter what. He asks if you and Whisper are willing to help him, and you both agree.
Lucas says that he thinks the entrance is behind the Mt. Wildwood shrine, near the Sacred Tree. Go to the Sacred Tree, where the Crank-a-kai is. Whisper makes a stone marker appear, and Lucas uses the key in it. Doors appear in the Sacred Tree. This is the Yo-kai Elevator! You'll use it to go to the Yo-kai World.
You can talk to Insomni to go back to the human realm.
Is This the Yo-kai World?
Go north and enter the temple. Try to go north and you see someone there. It's the Yo-kai boy who helped you earlier. His name is Venoct. He's upset that you brought Lucas here, because he's the only hope of defeating McKraken. Venoct attacks!
After you defeat him, he agrees to let you pass, but he tells you the truth: Yo-kai live for a long time, but not forever, and Lord Enma passed away. Yo-kai World is now in the control of evil Yo-kai, led by Chairman Squididilius McKraken.
Lucas is really the son of Lord Enma. Venoct and the other Yo-kai led him out of the Yo-kai World and erased his memories to protect him from McKraken.
Venoct gives you his medal.
You decide to send Lucas back to the human realm so he can be safe. Venoct will escort him there, and Lucas will wait at the school.
You might want to go back to Eyepo and swap Venoct into your party or any other Yo-kai that you want to use. You can also talk to Insomni to go back to the human realm if you want to stock up on items.
Then go north in the Yo-kai World and talk to the big red ogre. Gargaros will only let you pass if you have completed enough quests. If you haven't, you should go back to the human realm and look for blue and orange flags on the map, then talk to the people with the flags to do quests for them. Be sure to go inside buildings to look for more quest flags.
After you go through the gate, you reach an area with more friendly Yo-kai, as well as enemy Yo-kai. There is also a place where you can drop down below the clouds. This leads to Hungry Pass, which looks like a giant cake.
Some of the friendly Yo-kai that you talk to mention some white Yo-kai that have been causing problems. There are colorless Yo-kai around that will battle you.
There are a bunch of treasures in Hungry Pass, so be sure to explore thoroughly.
When you reach the second gate, you have to talk to a blue ogre called Ogralus. It says that it will not allow children to pass. It asks if you are a child or adult, and it tells you to answer honestly. So you should say "I'm a kid". He will let you pass.
Past the gate, you can jump off the ledge to reach Liar Mountain, where there are some enemy Yo-kai and treasures, as well as friendly Yo-kai that you can talk to. Go northwest in Liar Mountain to find the exit.
Continue on, and you find a black ogre called Orcanos. He will check how many battles you have fought. If you have fought enough, Orcanos lets you pass.
In the next area, you can drop down to Hooligan Road. The exit is in the northeast of the area.
Up above is Lord's Gate. Save the game with Eyepo, then go through the gate.
Go straight ahead and talk to McKraken. During the battle, try to target McKraken's hands. If you damage his hands enough, they will turn red, preventing some of his worst attacks. If McKraken puts his tentacles in front of him, try to target each of them, one at a time, to get rid of them, in order to prevent a strong attack. After you have damaged him for about half his HP, he heals up his hands more quickly, so you should just target his head at that point.
Happily Ever After?
After the battle, go back the way you came. Save the game with Eyepo, then talk to Mirapo to warp to the Yo-kai World entrance. From there, talk to Insomni to go back to the Sacred Tree. Then you can talk to Mirapo near the shrine to warp to the school.
Lucas is outside, south of the entrance. You find out that while you were in the Yo-kai World, some Yo-kai came to break the seals. Slimamander attacks, and it's much stronger than before.
After you defeat it, you learn that it is only a matter of time before McKraken can come to the human world. Whisper proposes sealing the Yo-kai Elevator. But if you do this, the Yo-kai will disappear from the human world, never to return.
Whisper says that you need to make the cherry blossoms bloom in order to fix the seals more strongly than ever before. He gives you Blossoming Powder.
Now you have to go find various colorless Yo-kai and fight them so that you can reach the cherry blossoms.
There is a white Impass northwest of you, at the corner of the school. Defeat it and you will make all of the cherry blossoms bloom at the school.
There is a white Rollen at the riverbank. Defeat it to make the cherry blossoms bloom by the river.
There is a white Bruff in the park east of your house. Defeat it to make the cherry blossoms bloom there.
Next, you need to go back to Mount Wildwood, to seal the Yo-kai away. Go to the Sacred Tree to find McKraken held by a seal, but he breaks free and transforms into a huge monster.
The Final Battle!
Aim for McKraken's two mustache tentacles. When they are both gone, McKraken becomes more vulnerable. Keep hitting him until his tongue is revealed, then attack that. When McKraken's HP reaches about half, he turns colorful and starts using stronger attacks.
Back to Normal
When you defeat him, you beat the game! Congratulations! Be sure to watch for the post-credits scene, and save the game after that. Then read more about what you can do in the post-game.