The director took elements from real time RPG battles and turn based systems, merged them, added a pinch of action, and something to make players think before they move. After a lot of trial and error, the battle system for The Last Story was formed.
An interesting tidbit shared by the producer is the development team created the battle system before designing the unknown characters. S/he said they used red and blue placeholder doodles. The theme of battles is still chaos and order.
Last time, we learned how players can distract enemies to protect their spell casters. This time the director briefly mentions a magic circle. There are various circles in the game, ones for recovery and flame were specifically mentioned. While standing in a magic circle, time freezes so players can enter commands and give AI controlled characters instructions. The post seems to imply other party members will be computer controlled while you directly control a single character.