I don't think there's supposed to be a clear explanation (spoilers)

I think the director clearly established the village was afflicted by an evil presence. But where the evil originated was more ambiguous and open to interpretation. There's evidence offered that the young woman was a protective spirit trying to stop the Japanese demon from harming the villagers. There's also evidence the Japanese man was the protective one and the female spirit was the true evil. But there's counter-evidence given for both perspectives (for example, if the woman is good, why does she block the police man from getting home while his daughter is killing the family?) leaving open the possibility that these are two evil supernatural beings engaged in a territorial dispute with human souls as pawns. The Japanese man's dialogue with the priest at the end ("no matter what I say I am, you will see the Devil") suggests the human characters don't really understand the nature of evil or of the spirits and their motivations for interfering in human affairs. The ambiguity of why both spirits are there provides a backdrop for exploring the themes of doubt, religion, superstition, xenophobia and paranoia among the human characters but doesn't necessarily have (or need) a clear explanation of its own.

Just one perspective on this interesting movie! I enjoyed it, especially the balance of funny and horrific elements.