Further east in the middle of a desert is a town called Kaipo. Once inside the town, you'll have to fight an unavoidable battle. You should kill the General first or he will run away if you kill all the soldiers.

Next, go to a house to the northeast (#1). Inside, you'll see Rosa sleeping in a bed so go talk to her you'll be given a new quest.

In the same house you'll notice the rabbit from Baron castle. Go talk to him, this time he'll introduce himself as Livingway.