This episode… I’ll explain some stuff.
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Fukuwarai, or Lucky Laugh, is a group game played during New Year’s where one person is blindfolded and asked to make a face with random parts. It’s similar to Pin the Tail on the Donkey.
Shichi-Go-San, or Seven-Five-Three, is a ritual to celebrate kids growing up. Read about it on the Wikipedia.
You are supposed to give Chitose Ame (The Thousand Year Candy) to the kid participating in the Shichi-Go-San.