The bespectacled lady with the shotgun manages to save Shinpei’s life (and her own) not by shooting Shadow Mio, but by shooting her shadow, which is its true form. Shadow Mio glitches out, allowing the lady to set his broken arm, introduce herself as Nagumo Ryuunosuke—the same name as a novelist Shin reads—and deliver some exposition.
Basically, Nagumo lifts most of the mystery of how the shadows operate: they scan humans with light, absorb their information, and feed on human data. The two of them are only survived by staying out of sight, and can discern even a shadow that’s a really good actor by stepping on their shadow, which will cause said shadow to move on its own.
Nagumo was sent to this island to save Shinpei, and seems to be doing it out of obligation for her sister. But after what happens when the two ascend the steps to the shrine grounds, Shin might just wish Nagumo had let Shadow Mio kill him. The shadows have amassed and have made a mountain of corpses out of the festival goers. Shin arrives just in time to watch both Toki and Sou get stabbed in the back of the skull.
When Nagumo shoots Shadow Sou’s arms off before he can kill the real Mio (who was being shielded by the real Sou, which, after hearing his confession and rejecting him…goddamn) but the “lead” shadow, a four-armed humanoid made of black goo, instantly copies her form and her shotgun and shoots back. Nagumo avoids the killshot, but is still gravely wounded.
The lead shadow reaches out with a stretchy arm and restrains Shin, noticing that he bears the eye of the shadows’ “mother”, enabling him to control time. But while Shin possesses the power to reset the game here and now at the moment of his defeat, what if the boss (in this case, the lead shadow) is not only aware that there’s a reset button, but that it’s attached to a console he can simply cut the power to?
We learn that the pile of corpses, and indeed every living soul on the island that is gradually swallowed up by waves of black and blue ooze, are all an offering, a meal for the shadows’ mother, Haine. A scientist at the Hishigata Clinic observes what’s happening and concludes that Haine managed to awaken by devouring a thousand human lives. Something tells me that’s just an appetizer, as shadows can reach out into the water…
The bottom line is, everything is super fuckity-fuck-fucked in this go-around. It’s a wash; by far the worst of the bad endings Shin has experienced so far, and reminds me of the things-can-and-will-always-get-worse progression of Subaru’s loops in Re:Zero. But the option to reset still exists, in the form of the dying Nagumo’s last shotgun shell.
Ushio, who it’s clear is unique among shadows in not being evil or wanting any part of helping Haine rise, punches the lead shadow in the fact, giving Nagumo time to shoot Shin in the head. She promises to save him next time no matter what if he finds her and tells her his name.
In the interstitial plane between the previous loop and a new one, Ushio can now see and hear Ushio clearly. She embraces him from behind and warns him to be careful, for his ability to reset has a limit. Shin figures out what that is soon after resetting: his start point keeps moving further forward in time, locking what came before in stone.
In this loop he has three days, but if he fails too many times, he won’t have the time he needs to save everyone, if he can, and will eventually reset to a time after everything is fucked. Meanwhile, we learn Shadow Ushio (if that’s what she even is) washes up the same day he arrives, meaning she could theoretically go to her own funeral, Huck Finn-style.