How To Expand Inventory In Final Fantasy 16

gamespot.com:

If you have experience playing role-playing games, you've likely experienced what it's like to hoard a bunch of items under the assumption you'll need them later. The way Final Fantasy XVI's inventory system works, however, ensures that you won't ever have to worry about that while exploring its fantastical world. Unlike previous games, you can only hold a small set of potions and utility items at one time anyways, so you'll use up any additional ones you find automatically. If you'd like to expand that inventory space a bit, though, we'll tell you how below.

You can expand your inventory the first time by completing the sidequest "Weird Science" that you receive from an NPC named Owain in the Hideaway. However, this optional expedition can't be obtained until you've advanced to the main quest «Out of the Shadow.» Once you've met with an NPC named Mid and gained access to Mid's Dungeon on the far left side of the map where you can speak to Owain and begin «Weird Science.»

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Owain's quest will require you to seek out some bomb ash for an invention he's working on, so you'll need to set off to kill a Bomb King. You can find this enemy in The Crock in Sanbreque, which can be accessed by heading through the path on the southeast of The Dragon's Aery and then taking a left. When you've taken down the Bomb King, take the three bomb ashes back to Owain.

When you've returned the bomb ash to Owain, he will upgrade your inventory to allow you to hold Potion x6, High Potion x4,