Josephine is a teenage girl who is currently attending Honest Osaki's Kendo School and Used Car Sales to learn Kendo swordsmanship. The old man Osaki teaches his students the art of psychic powers so they can better defeat the forces of evildoers. Josephine is given the Zopikki Talisman; a powerful artifact which transforms Josephine's normal self into a battle warrior. Gripping the bamboo sword and focusing her psychic powers, Josephine must defeat ghosts, pandas and all kinds of other strange creatures which look to cause trouble.

In Kendo Rage, the player takes control of Josephine. She can move left and right, jump, duck and attack with her bamboo sword. Josephine's psychic powers are shown on a bar and recharge gradually at a steady pace, changing color as they do. Depending on the color, an attack done will use up the current psychic energy and let loose a stronger attack, usually a projectile. Additionally, Josephine can summon flames around herself during a rush attack, at the cost of some energy. The game lasts seven levels, with a boss finishing off each level.