Grainpa is in a normally inaccessible area of Hungry Pass past the S rank Watch Lock in the Yo-kai World, where he can be challenged once a day until he's befriended through normal methods. He is, despite being a Rank B Yo-kai, a very strong opponent, and a team of around level 60 is recommended to fight him.
Yo-kai Watch 2
Grainpa may appear as a red mailbox Yo-kai Spot. These can appear slightly below-left the Tunnel entrance in Downtown, at the top of Downtown in between the Shopper's Row and Uptown exits, next to the Mirapo at Excellent Tower, or to the left of the Scratch Card Booth outside Excellent Tower. If he's not the yo-kai in it, don't reveal that yo-kai, reset the save, sleep for a day, then go searching again. You can save once you find Grainpa to continuously fight him until you befriend him normally.
You can also get him from the Crank-a-kai with a Green Coin.
Loafing: "Drying out..."
Receiving food (favourite): "Rice is a joy."
Receiving food (normal):
Receiving food (disliked):
Freed from Crank-a-kai: "Do you like rice? If you do, we're pretty much friends already."