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From ZeroWiki

Many of the urban legends classified as "Lost Village" are modelled on real incidents, such as: "A village was ruined when one villager massacred the others."

They are often an amalgamation of well-known actual incidents, legend and oral tradition.

Settings such as the "isolated mountain village" or "bygone customs" like night trysts or ceremonies often act to trigger the incidents themselves and these in turn become the motif for urban legends.

The reason for the popularity of urban legends may lie in the notion of "the view of the country from the city, or the modern bias toward the ancient."

To people in the modern city, the "village" is the wilderness and those who live there are "different."
Perhaps that scorn, or fear, finds expression in the urban legend.

For that reason, the setting of the legend must be the "isolated mountain village." Further, "bygone customs" are attractive elements that end up acting to provoke the incident.

At a case in point, there is a story about the area around the Minakami dam where Mayu went missing.

"The Lost Village"

In the mountains of the Minakami area, there was once a massacre in the so-called "Lost Village."
Years ago, on the night of a certain festival, there was a great massacare and the village disappeared from the map.
Only one woman survived.

If you walk in the forest where the village once lay, there is a small guardian statue and if you continue, you will come to the shrine gate that forms the entrance to the village. If you should pass through the gate, you will never return.
The night of the massacre continues in this village where day will never again break and a woman's horrific laugh rings throughout the village.

Next we have the "manor of bizarre murders, where the same tragedy recurs."

It's scale is much smaller, but generally speaking it resembles the pattern of the village as it is made up of elements based on true incidents.

Below is an example of this.
It has to do with Mafuyu's disappearance.

"The House Of Mutilation"

In the mountain area of Himuro, there remains a manor where years ago there was said to be a massacre. There have always been vanishings in the nearby forest and many of the spirited aways are said to end up in the manor.

Their corpses have been found with both hands, legs and head severed off.

One more example is the seemingly-related "Manor of Sleep" urban legend that I'm researching now.

"The Manor of Sleep" legend was picked up in various magazines in the 1960s, but incidents with very similar characteristics can be found here and there in older media.

This newspaper article is from the early 1900s and is of no relation to when "The Manor of Sleep" legend was taken up, but the background of the "spirited aways" and those people's later conditions bear many similarities to "The Manor of Sleep" urban legend.

I'm still investigating, but these incidents may trace back to the 19th century and I have seen legends in several folklore books that may have become the basis for "The Manor of Sleep."