In what used to be the USSR, the group find the shrine in a Soviet scientific research facility. The Friendship Games are taking place with the first time that Western nations have been invited in an effort to promote glasnost. Daniel has been put on the West's hockey team, which he worries that he cannot even skate, resorting to Mr. Miyagi's unconventional lessons once again. Meanwhile, one scientist steals the shrine to empower his son, who is playing on the East's hockey team, in order to prove the supremacy of the Soviets, only for both to get more than they bargained for.

The trio goes to San Francisco where they find a group of senior citizens known as the "Gray Ghosts", so named because they were enthuiasts of the classic car by the same name. They learn the shrine may be in possession of a reclusive tycoon named Frump. Daniel has to work with one of the Gray Ghosts, who is very different from the stereotypes Daniel has of old ladies.