Why can't I explore and interact with people?
You can explore to your heart's content later.
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But for now, you urgently need a rest.
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As you will have seen in the game's INTRO, you are a backpacker who has been walking for days. For miles and miles, you have found no appropriate place to stop and rest. But now, surely there's a bed waiting for you somewhere in this town that randomly popped up in your path.