In 1986 Yokosuka, Japan, teenage martial artist Ryo Hazuki returns to his family dojo to witness a confrontation between his father Iwao and a Chinese man, Lan Di. Lan Di demands Iwao give him a mysterious stone artifact, the dragon mirror. When he threatens to kill Ryo, Iwao tells him the mirror is buried under the cherry blossom tree outside. As Lan Di's men dig up the mirror, Lan Di mentions Zhao Sunming, whom Iwao allegedly killed in Mengcun, China. Lan Di delivers a finishing blow and Iwao dies in Ryo's arms.
Ryo's investigation leads him to Master Chen in the Yokosuka harbor. Through Chen and his son Guizhang, Ryo learns that the dragon mirror taken by Lan Di is one of two mirrors. He locates the second, the phoenix mirror, in a basement hidden beneath his father's dojo. He defeats a local gang connected to Lan Di's organization, and Master Chen tells him to seek the aid of Master Xiuying in Hong Kong. Ryo boards a boat to China.