The central characters are the Bonomiya family, whose ancestors fled the ancient capital of Kyoto 900 years ago and settled in a small rural village. As the story starts, the Bonomiyas are preparing for their Festival of the Ancestors. The clan is divided into two parts: the main house, presided over by a cowardly boor named Takanao; and the branch house. Both houses are bound by strict tradition: only recently have they been allowed to use electricity, and such modern conveniences as televisions and telephones are forbidden. Takanao, however, breaks the rules when it suits him: as head of the main house, no one may question his decisions. But only he may break the custom, which he does for his own gain. Unfortunately, his schemes never work, and his irresponsibility has lead both branches of the family into trouble.
In the branch house lives middle-aged spinster Miki. Miki is an expert in traditional paper-making; she buys raw materials from the nearby Doi paper-making factory, adds fibers and dyes made from plants gathered in the nearby cedar forest, and creates beautiful hand-made parchments.
Into the village comes a young schoolteacher named Akira. When Akira's motorbike runs out of gas, young Seiji, of the Doi paper family, gives him a lift into town. Entering the small village, Seiji points out some of the locals: the stolid priests who sit silently at the bus stop, at which no bus has stopped in a decade... the surly girl on her motorbike who delivers newspapers... and the old man called the Hunter, who has slain 999 animals (not all of which, it turns out, walked on four legs)...
Since Seiji's route brings him to the Bonomiya houses, Akira has the chance to meet the Bonomiyas. As Seiji walks him through the woods to town, however, Akira is overcome by a strange seizure. When he awakens back at the Bonomiya paper workshop, the first face he sees is Miki's. Though Seiji jokingly introduces her as his surrogate mother, Akira refuses to believe that Miki is old enough for such a description.
Immediately after Akira's arrival, strange things begin to happen. Miki's sleep is troubled by strange dreams involving childbirth. It seems she is not alone with her nightmares: everyone else in the family seems to be having bad dreams as well (that of Miki's sister-in-law is shown briefly, in an episode which is both harrowing and very funny). Even Miki's aged Mother confesses she is troubled in her sleep. And the neighbors are whispering that wild dogs may be wandering in the area.
For even though Takanao is head of the household, and has the power to bargain his family into poverty, the real source of the Bonomiya family's power rests with the women. They are said to be the protectors of the Inugami, evil dog spirits. If the Bonomiya women fail to keep watch over the spirits, or worse, if they decide to use them for revenge, then the Inugami will run wild in the village looking for blood. When anything bad happens in town (and many things do in short order), all eyes turn suspiciously to the Bonomiya household.
Miki suddenly starts to look younger with every day. First she finds she no longer needs her glasses. Next the grey begins to recede from her hair, and she finds herself more and more energetic. In spite of the differences in their ages, Akira and Miki find themselves drawn to each other, and soon begin an affair, regardless of what anyone might say.
And then, one by one, the real shocks begin.
Some of the twists you'll be able to guess, though even the more obvious ones have hidden barbs that make them even more alarming. I do want to point out, without giving anything away, that Inugami does not have anything so trite as a surprise ending. Its turnarounds fall somewhere in the middle of the film, after which the end seems inevitable.
And yes, there is some visceral horror to go along with the sense of spiritual unease. Though most of the grue is implied, there's enough to add a further unsettling dimension to the story. The climax and end of the film are abrupt. They may seem a bit ambiguous at first (especially to a gaijin like me, who isn't well versed on Japanese ritual), but after you consider them for a while (and I'm pretty sure you will be considering them long after the film ends), I think you'll see what the end must imply.
To me, Inugami, the title of which is written in ancient-style kanji characters, suggested the horrible strength of tradition: on the one hand, it's impossible to escape from it. Everything you do to be free from it will only bring you back into its claws (as though to underscore this, an ironic quotation from Verdi's opera La Forza del Destino / The Force of Destiny is used in the soundtrack). On the other hand, tradition devours its own, like a starving wolf. It's run out, exhausted: either barren, like Miki's sister-in-law; or, in consuming and destroying those that follow it, it gives birth to itself in a horrible parody of the eternal cycle of rebirth in Nature.
Inugami is yet another production of the Asmik Ace company, who also brought us the Ring cycle, Shikoku and a number of other recent gems. The new trend in Japanese horror seems to be toward subtlety, maturity and emotional richness. This is quite a way from the eighties stereotype of Japanese horror: brutal, bloody and nihilistic. While the darkness in Japanese horror is as deep as it ever was, in films like Inugami it's tempered by a real understanding of human emotions. Though this probably makes them even more dangerous, I think it's a change for the better.