Mr. Tako, head of Pacific Pharmaceuticals, is frustrated with the television shows his company is sponsoring and wants something to boost his ratings. When a doctor tells Tako about a giant monster he discovered on the small Faro Island, Tako believes that it would be a brilliant idea to use the monster to gain publicity. Tako immediately sends two men, Sakurai and Kinsaburo, to find and bring back the monster. Meanwhile, the American submarine Seahawk gets caught in an iceberg. The iceberg collapses, unleashing Godzilla, who then destroys the submarine and a nearby military base.
On Faro Island, a giant octopus attacks the native village. The mysterious Faro monster arrives, revealed to be King Kong and defeats the octopus. Kong then drinks some red berry juice that immediately put him to sleep. Sakurai and Kinsaburo place Kong on a large raft and begin to transport him back to Japan. Mr. Tako arrives on the ship transporting Kong, but a JSDF ship stops them and orders them to return Kong to Faro Island. Meanwhile, Godzilla arrives in Japan and begins terrorizing the countryside. Kong wakes up and breaks free from the raft. Reaching the mainland, Kong engages Godzilla in a brief battle but retreats after Godzilla nearly burns him alive.
The JSDF dig a large pit laden with explosives and lure Godzilla into it, but Godzilla is unharmed. They next string up a barrier of power lines around the city filled with a 1,000,000 volts of electricity (50,000 volts were tried in the first film but failed to turn the monster back), which prove effective against Godzilla. Kong then approaches Tokyo and tears through the power lines, feeding off the electricity which seems to make him stronger. Kong then enters Tokyo and captures Fumiko, Sakurai’s sister. The JSDF launch capsules full of the Faro Island berry juice and put Kong to sleep. The JSDF then decide to transport Kong via balloons to Godzilla, in hopes that they will kill each other.
The next morning, Kong is dropped next to Godzilla at the summit of Mt. Fuji and the two engage in a final battle. Godzilla initially has the advantage but Kong regains his strength after absorbing electricity from a nearby lightning cloud. The monsters continue their fight and, after tearing through Atami Castle, fall off a cliff together into the Pacific Ocean. After an underwater battle, only King Kong resurfaces and begins to swim towards his island home. There is no sign of Godzilla. The JSDF decide not to pursue Kong but rather, let him return home.
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