What is tough about starting out on hard is the beginning versus the bosses when you don't really have many moves at your disposal. Regular thugs/enemies are usually push-overs imo. Anyway, the bosses block more often, counter you frequently if you perform long strings of combos, generally more aggressive, have a bit more attack power, and gain some extra health. After gaining some levels, its really not bad, so long as you know the fundamentals of evading, countering, and blocking.
If you decide to stick with normal, and this is assuming Y4 is like Y3 where you can carry over your stuff to a new difficulty after beating the game. Then you'll be at an advantage since you will be near/fully leveled to counter this stuff.
As for the bonus items, the torso wrap is given to you if you have a Yakuza 3 save. Gion's bell is a item given to those that have a Kenzan save. Since the U.S. doesn't have that, I think Sega associated the Yakuza 3 save with it as well. Using them is like armor/charms, they don't wear out. Btw, if you have both equipped together, you will slowly regenerate health in battle if you stand still.