Under the command of Bagley, Algren and his companions travel to Japan. Japan is in the middle of drastic civil change, and the new Western-style additions to society have not gone unopposed. The samurai are conducting an armed insurrection against the modernization campaign, and it is for the purpose of suppressing this insurrection that Algren is called to Japan. The newly-formed Japanese Army is a poorly-trained and equipped conscripted army of peasants totally lacking in combat experience. Algren does his best to remedy this, but before the men are trained to his satisfaction, the leader of the insurrection, Katsumoto (Ken Watanabe), attacks a railroad outside his province. Bagley orders Algren to lead the inexperienced conscripts to engage Katsumoto. Algren protests and, in a demonstration, illustrates the army's inexperience and inadequate training. Bagley dismisses Algren's concerns and orders a regiment to track down and engage Katsumoto.
When the regiment arrives at the battlefield, Bagley moves to the rear and orders Algren to do the same, since the Americans are technically non-combatants. Algren refuses and takes personal command of the regiment. Algren then orders Sergeant Gant to report to the rear as well, but Gant refuses out of personal loyalty to Algren. During the battle, the conscripted peasants panic despite Algren's best efforts to keep them under control.
Samurai swarm the wholly unprepared army and the soldiers flee in disarray. Algren and Gant stand their ground and manage to kill several samurai, but Gant is killed and Algren is thrown from his horse. On foot, he desperately fends off several samurai with a broken spear embroidered with a flag depicting a white tiger. The flag on the spear reminds Katsumoto of a vision he experienced during meditation. Katsumoto's brother-in-law, the red-masked samurai Hirotaro and Gant's killer, prepares to finish Algren as well, but Algren seizes a spear from the ground and stabs him through the throat. Believing what he has witnessed to be an omen, Katsumoto prevents his warriors finishing off the wounded Algren and takes him prisoner. Algren is taken to an isolated village, where he gradually recovers in a house belonging to Hirotaro's family, including his widow Taka, her two sons, Higen and Magojiro, and Katsumoto's son, Nobutada (Shin Koyamada).
Over time, Algren overcomes both his alcoholism and the nightmares of his traumatic past, and begins to assimilate to village life, although he does not adopt many Japanese customs. Eventually, he meets Katsumoto, who takes an interest in Algren and begins conversing regularly with him, each gaining a healthy respect for the other. Algren confides to his journal that he has never felt entirely at peace until he came among Katsumoto and his people. Despite lingering fidelity to Hirotaro, Taka develops romantic feelings for Algren, particularly when she...