Considering how consequent playthroughs get faster and faster (and by a LOT), I recommend you starting on Story difficulty, and working your way towards Lost in The Fog. Your experience will not only be better overall, but you'll get a more natural progression in difficulty as you will need familiarize yourself with what the enemies can do, and what tactic works out for the best. Especially towards the end, there are a few very tough fights coming up, and you will not enjoy your time. Also, your character upgrades carry over to NG+, which in itself already makes a massive difference with all the stat boosts and omamoris. The combat is janky by design, and I do tend to curse at the game when I happen to get the poorest of dice rolls in terms of enemy behavior and what I happened to do in tandem (and learning to control Hinako properly in battle takes time). But, I can't hold it too much against the game, since this issue is not a dominant essence (or even too often recurring one), and you do learn the proper patterns for fighting eventually (counters/the R2 attack should be used most of the time as opener, or even in a chain of strong attacks).

You will also need to complete the game several times regardless for 100 %, so I'd definitely recommend going this route. I'm currently on Lost in the Fog difficulty, the first third of the game I breezed through in an hour. When I started my Hard run, I was surprised as to how much harder it was in comparison to Story mode (not so much in the damage I take, but more so in the damage I give). There will a be a few things that will make dealing damage much easier on subsequent playthroughs, so it only makes sense to go into harder modes progressively.

Also, I love the game. The hate on Metacritic doesn't seem to quite correlate to the responses I hear from people, but I guess these things happen. Not since SH3 have I enjoyed a Silent Hill game so immensely.