In Ghost of Yotei you increase your health by collecting Hot Springs. There are 16 Hot Springs in total, and each of them increases health by a little bit. Every region has a few of them, and some regions are gated behind story progress. The ones in Yotei Grasslands, Tokachi Range, Nayoro Wilds are accessible from the start. The other regions are unlocked from story progress.
Hot Springs are little pools of water surrounded by rocks and a tree. Interact with the bucket at the hot springs to bathe in them. You will get a choice to reflect on the game’s events, but it never matters what you pick. After about a minute of sitting in the hot spring you will get the health increase.
As the game doesn’t use a leveling system, there’s no way to “level up”. Hot Springs are the only way to permanently improve health. However, you can cook meals at camps to gain passive buffs. You can also equip charms (for example from Shrine Climbs and other activities) and Armor to get more passive buffs. You can also pray at Altars of Reflection to unlock new skills and complete Bamboo Strikes to increase Spirit used for special attacks.
