In the spring of 1959, the people of Tokyo are filled with hope and excitement as the city is chosen to host the 1964 Olympics, heralding a new era of rapid economic growth. On the humble, close-knit streets of Sunset on Third Street, life continues for the residents of the Suzuki auto repair shop and the small candy store across the way. The story picks up just four months after the events of the first film.

Ryunosuke Chagawa, the aspiring writer who runs the candy shop, is now caring for the young boy Junnosuke, but his heart remains heavy with the sudden disappearance of Hiromi, the beautiful bar owner he loves. Struggling to make ends meet with his pulp fiction writing, Chagawa faces a new threat to his makeshift family. Junnosuke’s wealthy biological father, Yasunari Kawabuchi, reappears and demands the boy be returned to him, arguing that Chagawa lacks the financial means to provide a proper home. Determined to prove his worth as a guardian and win back Hiromi, Chagawa makes a bold decision. He sets aside his low-brow stories to rewrite a serious literary novel, aiming for the prestigious and life-changing Akutagawa Prize.

Across the street at Suzuki Auto, business is booming. The young apprentice Mutsuko, known as Roku, has grown into a confident and skilled mechanic. Her quiet life is stirred when a shy young man named Takeo, who is training to become a chef, nervously enters the shop to ask her out, marking the possibility of her first romance. The Suzuki household itself is shaken up by the arrival of a new, temporary resident. A young relative named Mika is sent to live with them after her father’s business fails. Having grown up in a wealthy, pampered environment, the spoiled Mika initially scorns the family’s modest lifestyle, causing friction with the Suzuki’s young son, Ippei.

As the seasons pass from spring to winter, the threads of these lives weave together in the warm, nostalgic fabric of the neighborhood. Chagawa locks himself away to write, pouring his desperation and love onto the page. Ippei and Mika slowly move from resentment to a childish friendship, discovering the meaning of family beyond material wealth. Meanwhile, a frantic search leads Chagawa to the shocking discovery of Hiromi working as a glamorous dancer under the stage name Betty, forcing him to confront his own insecurities and his feelings for her.

When winter arrives, the entire neighborhood buzzes with excitement as news breaks that Chagawa has been nominated for the Akutagawa Prize. As the deadline for the final decision approaches, Chagawa must race to find Hiromi before she makes a life-altering decision to marry a wealthy patron, while also facing the looming threat of losing Junnosuke forever. Through triumphs and near-misses, the residents of Third Street prove that even as the world modernizes and the Tokyo Tower looms larger on the horizon, the simple bonds of community and family remain the true source of lasting happiness.