OK, so I finished the basic concept of the battle system:
http://i205.photobucket.com/albums/bb49 ... battle.png[/img]
The general style of the battle system harkens back to the Super Famicom games. However, as with most modern Megaten games, this battlesystem rewards exploiting your enemies' weaknesses while covering your own. Every time you hit an enemy's weakness or score a critical, your Morale meter (Gauge at the bottom to the left of the M) will go up significantly. It goes up a bit when you attack an enemy with something they're not weak against and not strong against, but striking weaknesses makes it rise much faster.
If you strike an enemy with something they're strong against, your morale will not rise or fall. If you strike an enemy with something they reflect, your morale will fall. If you strike an enemy with something they absorb, your morale will fall drastically and there's a chance you will recieve the panic status ailment.
It's important to try and keep morale high; the more powerful offensive and defensive moves all require a certain amount of morale as well as their HP or MP cost. Additionally, if your morale falls below a certain point, the character's will to fight will be extinguished until they recover, meaning they will suffer massive temporary penalties to their stats.
When an enemy hits your weakness or crits on you, the character(s) hit will lose some morale. Being strong against an enemy's attack slightly increases your morale. Reflecting or absorbing hits increases your morale. In addition, there are certain skills that can increase an ally's morale or decrease an enemy's morale. Yes, enemies have morale too and are affected by it in the same way you are. Keep this in mind for some of the tougher encounters; they may be able to unleash hell if you let their morale rise too much.