Even in religion, the most conservative of all institutions, especially among barbarians, the Ainos have suffered Japanese influence to intrude itself. It is Japanese rice-beer, under its Japanese name of sake, which they offer in libations to their gods. Their very word for "prayer" seems to be archaic Japanese. A mediæval Japanese hero, Yoshitsune, is generally allowed to be held in religious reverence by them.
Even the word which the Ainu used for "god" had by Chamberlain's day been replaced by a loan-word from Japanese - kamui, borrowing from the Japanese kami. In other words, this was a people whose traditions had already, by the time they were a subject of interest to anthropologists, been almost trampled into oblivion.
This means that even the folk-tales of the Ainu often seem to be hinting at a people who were trying to come to terms with a world which had radically and permanently changed. Take this story:
The First Appearance of the Horse in Aino-land.
A very beautiful woman had a husband. He was a very skilful fellow. Once he went to the mountains, and disappeared. But at night he returned, bearing a deer on his back. After feasting on the deer, they went to bed. But in the middle of the night, the woman wept and screamed, saying: "This man is not my husband. Though with shame, I will declare the fact as it is. His penis is so big, so big, so big, that it will not get into my vagina; and if it did get in, I should die."
Alarmed by her cries, the neighbours ran out, and came into her house; and one strong fellow took a stick, and beat the husband, saying: "You must be some sort of devil," whereupon the husband turned into a horse, and ran away neighing. Afterwards he was beaten to death.
The truth was that the husband had been killed and supplanted by the horse. That was the first the Ainos saw of horses. In ancient days every sort of creature could thus assume human shape. So it is said.
I'm only the most amateur of armchair speculators, but even so this tale strikes me as being fraught with subtexts (practically super-texts, really) about the collision between horse-riding agriculturalist invaders from the South and Northern forest-dwelling hunter-gatherers and fishermen. I think it's fair to say that Freud would have had a field day with it.
In any event, I think it's hard to disagree with Chamberlain who, despite his pretty mean-spirited and patronising view of the Ainu, makes the excellent point that folklore is in part a kind of attempt at science - a way of understanding the world. Not explaining things, but processing them and internalising them. I think it's also much more than that and you shouldn't reduce it to something purely instrumental, but it seems to play that role amongst many others. In the tales of the Ainu, read in the round, you get a strong sense of people (probably subconsciously) trying through stories to get to the bottom of why their world was the way it was.
This all raises a question for me: what kind of stories would people in a fantasy setting tell? Given that folklore is not just a way of telling fun stories but a way of making sense of things, how would people do that in a world where there were actually dragons and orcs and elves and magic? That is, we human beings in the real world seem in part to have dreamed up supernatural events in order to form a perspective on various elements of our own existence. So what kind of stories would it be necessary to dream up in a world which actually really had supernatural events taking place?