While trying to exorcise Monk Hoichi, Bell sends you to Long Life Town for Sweet Potato Wine which you will then use in the waterfall cave behind the temple*. This summons Charcoal aka Mr. Binchotan. Bell and Charcoal will duel with Bell the inevitable victor, leaving Charcoal in ashes. She'll eventually lament that one sword is not enough, so return to the cave and you'll find that the ashes are glowing. Examine them and Charcoal will be reconstituted as a child version of himself complete with diaper. Charcoal offers you a second sword in exchange for defeating him in a duel. He'll shout "Ping" and you'll press X to attack. Be careful not to press X on "Bing!" Now you have the second sword and a kiss from Charcoal.
Note: * Stand in between Bell and the pan when adding the wine to avoid taking damage during the scripted events.