Recommended:
LV.8+
50x Medicines
See Build for reccomended Build.
You can get 2x Elec Gem by taking the Magatsuhi Rail Just before the fight making it bit easier, Not needed.
Battle:
You will start the battle with three Turn Icons. To stay true to the challenges rules start by recalling Atsuta and Yuko back into the Demon Stock and use a Spyglass so you're left with 1 Turn Icon.
The general idea is to first exploit the Bosses weakness first to make use of the additional turns. However MP conservation is key. The moment your MP run out this battle will turn into an endless slog. You will get +5MP when Magatsuhi Gauge is full.
If you don't Guard during Enemy Magatsuhi Phase you will most likely die. You may prioritize using a Medicine though, it's up to you.
Bestial Bite does better damage per MP when critting so use it during your Critical phase.
Tarunda is equipped but you can't keep uptime for long. Costs to much MP for what it's worth.
Dia could be an alternative but it's better to use MP offensively.
Use a Medicine when 1/2 HP, you'll have more than enough available for this fight. I used around 35.
Best Damage per Turn:
Omagatoki: Critical (No Turn Cost) + Bestial Bite (5MP) + Bestial Bite (5MP)
Enemy Magatsuhi Phase:
(Zio (10MP)) + Guard