This is a memorial service for the spirits of fallen soldiers and to pray for peace which takes place on August 15th every year. A large 大 (the kanji symbol for great) is set alight on Mount Wakakusa using 108 flames to represent the traditional number of worldly desires possessed by humans. The event is the culmination of the O-Bon festival and fires are meant to guide the spirits back to the afterlife. You can see the fire from various spots in Nara Park and lasts around 30 minutes.
Source: Japan Cheapo
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