"Many fantastic beings are thought to inhabit the yama"
"On the Extinction of the Japanese Wolf" (1997), by John Knight:
Although the Japanese wolf officially became extinct in 1905, this position has been challenged by many local sightings across the country. The present paper, presenting data from the Kii Peninsula, analyzes the wolf controversy as a form of environmental symbolism. Wolf folklore is presented to show how, for generations of Japanese upland dwellers, the moral character of the wolf was environmentally predicated. Similarly, modern and contemporary local claims about the presence of the officially absent wolves can be understood as metonymical references to the yama (mountain forests) and to the historical changes that have taken place in the upland environment in modern times.
Takeaway: wolves are awesome.
This is something related to the third main feature of the wolf: its discreet observance of human beings. This is reflected in the okuri-ōkami tales noted above. Japanese folklore credits other wild animals, such as the fox, tanuki 狸 (raccoon-dog), and snake, with a capacity for concealment. The difference is that these animals are said to achieve this by assuming human (often female) form, while Japanese wolf-lore—unlike European wolf-lore (e.g., NOLL 1992; RHEINHEIMER 1995)—has little to say about wolf shapeshifting or lycanthropy. Rather, the Japanese wolf is concealed by the natural environment itself. This virtual invisibility of the wolf in the yama is the basis for the claims to have encountered it after its supposed extinction. Even when the wolf actually did exist, in the yama it was able to keep well out of sight of man, while keeping man in its sights.
Don't miss Knight's account of his attendance at a sasoidashi 誘い出し, an attempt to trick otherwise undetectable hypothetical wolves into answering recorded howls, in Chichibu.
The etymology of ōkami is interesting, by the way: the most favored explanation nowadays seems to be the straightforward analysis: in Frellesvig-style OJ orthography, /opo/ "great" + /kamwi/ "god". But there doesn't seem to be any slam-dunk evidence for this theory. The word opokamwi appears in the Man'yōshū, but it just means "great god", not "wolf." Elsewhere, in the Hitachi Fūdoki, there's a bit that goes:
駅家、名曰大神。所以然称者、大蛇多住。
The waystation here is named "大神" [great god]. It is called this because many 大蛇 [giant snakes] live there.
You can't be 100% sure because the original didn't include a pronunciation, but the modern scholarly consensus seems to be that both 大神 "great god" and 大蛇 "giant snake" were intended to be pronounced /opokamwi/.
As this excellent essay explains, what it comes down to is that there doesn't seem to be any contemporary evidence for the now-standard story that in ancient Japan, wolves were revered as gods, and great ones at that. The word kami (the essay points out) never seems to be applied to actual, close-at-hand animals like that, no matter how scary they were; you need some sort of supernatural or otherwise fantastical connection. (Giant snakes, giant monkeys requiring human sacrifice, animals found only on the continent, etc.)
That doesn't necessarily mean that the etymology is wrong, of course. (There certainly doesn't seem to be a better alternate theory.) It just suggests that even if modern ōkami does literally descend from a word meaning "great god", that original word wasn't necessarily meant to convey the sort of supernatural awe that you might assume. (For example, maybe it was simple euphemism: the ancient Japanese didn't consider wolves actual gods, but spoke as if they did in order to stay on the wolves' good side.)