In the first game, surrender leaves you open to attack and ends the fight after a set time, but in the sequel, it's a cutscene.
Here's that bloodstained versus Mikado accepting her fate.
And so, the bandaged story Mikado cannot outlive herself.
This location, by the way, is a story scene exclusive: outside the Tatara Shrine. (Not the Tatara Shrine Path stage.) You normally cannot fight here.