When you speak to Liu-san in his barber shop, he'll tell you that he's not really a Three Blades member - although his father is. Liu-san Sr. walks around Dobuita every day, and usually ends up in Suzume Park. Make your way round there, and speak to the old man with gray hair sitting on the bench in the park.
Liu-san knows a lot about the Three Blades, but can't help much with the search for Lan Di. He guesses from the name that Lan Di is a probably member of a Chinese Cartel operating out of the harbor, and suggests that Ryo look for sailors who might work on Chinese ships in the harbor.
Some of Ryo's friends don't appreciate him asking if they hang out with sailors, but if you speak with Tom, he knows that they hang out in bars. There are three bars in Dobuita - MJQ Jazz Bar, Bar Yokosuka and Heartbeats. The MJQ and Bar Yokosuka open at 5pm, while Heartbeats isn't open until 7pm. If you go into Bar Yokosuka, the bartender will tell you that sailors aren't in his clientele, but the other two are a fairly safe bet. Going into the MJQ Jazz Bar will give you a chance to play pool against a couple of guys who might be sailors, with ¥1000 and sailor-related information riding on the wager. To win their bet, simply tap 19 times to line up a perfect shot. Even when you win the bet, they don't give you any helpful information, so that leaves you with the only bar left: Heartbeats.
Either way, the sailors you're looking for are in Heartbeats, so after 7pm you can go down to meet them. The welcome party is a couple of drunk foreigners, but they don't pose too much of a problem for Ryo.
Once you're inside the bar, you'll get more resistance from the customers, but again Ryo's more than capable of looking after himself.
Finally, the bartender gives you a name - Charlie. He's a biker with a leather jacket, sunglasses and a tattoo, but other than that the bartender doesn't know much about him. He suggests you talk to the motorcycle store owner, then kicks you out with a warning not to come back.
The Knocking Motorcycle store is just opposite the stairs down to Heartbeats. Ono-san, the owner, is outside tending to one of the bikes. Ask him about Charlie and he'll start complaining about what a poser he is, before telling you that Charlie often causes problems at the jacket shop. Jupiter Jackets is on the main street in Dobuita, just past Tom's Hotdog truck. They close at 8pm though, so you may not be able to make it in time.
Although you can stay out much later than this, there's not much you need to do - head home and save the game.
In the morning, go to the dojo. Fuku-san is trying to improve his technique on a move called Pit Blow, but he's having trouble. If you agree to give him advice, Ryo will learn the move. If you don't make it this time you may be able to learn it by coming back to the dojo later.
There's a short QTE on your way through Yamanose (a couple of kids playing football)
and heading through Sakuragaoka on the way to Dobuita, you'll find Nozomi being intimidated by the thugs from the first QTE. Ryo will step in to protect her, and you'll have your first Free Battle of the game. Use various kicks and punches (remember to block too) to take them down easily.
Back in Dobuita, speak to Tsuruoka-san at the jacket shop, and he'll tell you that Charlie often comes round, but there's no regular pattern. You can talk to most of the storekeepers about Charlie, but few of them will have any clear information. However, speaking to Kinuyo-san at the Lunchbox Stand will get you a lead in the shape of Nagai Industries. Ask around about Nagai and you'll soon get the idea it's not a friendly place - most people are fairly sure it's a front for the local yakuza (Japanese mafia). The Nagai Industries building is on the same street as Liu Barber, just beside the Water Dragon 2 store. It opens at 1pm.
Inside at the top of the stairs is a pretty unfriendly character, but you can ignore him. Go through the door and you'll find yourself among some shady-looking characters. You can speak to them all, getting various degrees of cooperation and hostility, but the guy sitting by the boss will give you some concrete info - Charlie usually hangs around Dobuita at night.
"Night" means after 7pm (when the little cutscene of the streetlamps comes up), so you'll probably have some time to kill. Once it's after 7pm, go to the You GAME Arcade - one of the foreigners from the Heartbeats is there to talk to you. He'll tell you that he knows Charlie, and offers to take you to meet him, but it's all a trap to get back at Ryo for the fight in Heartbeats. After a Free Battle, you'll get to ask one of them about Charlie, which soon moves onto a discussion about tattoos. This thug swears he got his in Okinawa, but he's heard of a place in Yokosuka as well.
The best way to get info about the tattoo parlour is by asking two of the bikers around town - they're usually hanging out at the Knocking Motorcycle store or in the Arcade. One of them will ask if you want to join their gang - accept his offer and he tells you where the tattoo parlour is, suggesting you go get the gang symbol if you're serious about joining up - the place is in Okayama Heights. You can ask around to get directions - they don't close until midnight, so you've got plenty of time to look for it. The parlour is upstairs, the second door from the top of the stairs.
Inside the tattoo parlour, the artist insists they're closed, fobbing you off by telling you that Charlie "might" come in tomorrow. They open again at 2pm, so it's time to head home to save and sleep.
In the morning, you can head to the dojo if you missed Pit Blow the day before, or waste time looking around the house and the areas between home and Dobuita.
Once it's after 2pm, you can go to tattoo parlor. The owner warns you against waking Charlie while he's sleeping in back, but you won't get far without talking to him. You have to press to pull back the curtain, but Charlie is less than pleased to see you and Ryo has to defend himself.
Charlie offers to introduce you to members of the Cartel, and will meet you at the Arcade at 3pm tomorrow. When you leave you’ll be greeted with a cut-scene with Nozomi.
Now you've got some more time to kill - it's worth spending some time practicing your moves (it might be a good idea to pick up some new ones at Bunkado Antiques, between Tom and the Tomato store), or you can spend some money in the Arcade. Head home when you're finished.
If it's after 7pm, you can go to the dojo for a sparring match with Fuku-san. The match will happen automatically in the morning, if you don't feel like kicking his ass tonight. Once you've beaten him senseless, Ryo will go back to the house. You'll be confronted by Ine-san, who's feeling guilty that she hasn't reined you in sooner. Ryo will hold his ground though, and Ine-san will take you inside and give you a letter that arrived for your father a few days after he died.
After you confer with Fuku-san outside, you'll discover that it's in Chinese - you'll need to get it translated.
On your way through Sakuragaoka, you'll be approached by a kid who seems pretty upset after some thugs took his soccer ball. They'll give it back if you go with the kid, so Ryo does the honorable thing and follows the boy to the building site.
Charlie has come to pay you back, and he's brought some friends. You'll have to Free Battle them, after which Charlie grabs the boy.
The boy, Gao Wen, thanks Ryo in Chinese, which brings Ryo back to the letter he just got. Time to head into Dobuita and see if anyone can help translate it.