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Shokan is a komainu - a Japanese (although based on a foo dog of Chinese origin) lion-dog hybrid creature carved from stone. Komainu are made in pairs, and the two statues are placed to protect the entrances of important places, such as temples or shrines. Hotaru specifically guarded a small shinto shrine in the mountains. His partner statue, whom he considers his soul mate, sat across from him for many years. His shrine was rarely ever visited and fell into disrepair.
There is a myth in Japan that if an object exists for 100 years it becomes self aware and turns into a type of yokai (Japanese supernatural monster or spirit) called a tsukumogami. After his 100th birthday, this transformation happened to Shokan. However, it was extremely unpleasant for him, because upon waking up he saw that his shrine was in ruins and his partner had been destroyed by the elements. She had not been able to turn into a tsukumogami because she had been smothered in moss, pieces crumbling off of her, her face weathered away by rain. A komainu without their partner is really only half a creature. Shokan was deeply hurt, but mostly angered. He blamed the humans for losing their spirituality and leaving them to rot and die. So he took his rage out on humans, cursing the mountain.
Trapped in his stone body, Shokan was the cause of many people going missing in the forest. Some of them were lost, others killed themselves. He caused flooding and landslides when he could. If people came close to his shrine, they lost their mind, or came down with mysterious illnesses. Soon the area was seen to be cursed.
The kitsune Nuo decided to do a good deed and approached Shokan. He offered him freedom from his stone body if he was willing to stop taking his anger out on the humans. Shokan accepted the agreement, and was given a flesh and blood body. He considers himself greatly indebted to Nuo and is at his beck and call. He still bares a tremendous grudge against people though. He lives in his abandoned little shrine alone, although Nuo sometimes calls on him for favors.
