Last night, I discovered that a new Kinokuniya Bookstore had opened in the Palisades Mall near where I live. So I had to go in and buy something, which turned out to be Basil Chamberlain's 1906 translation of the Kojiki. I haven't gotten far yet, but I found the following in the introduction:
Of all the words for which it is hard to find a suitable English equivalent Kami is the hardest. Indeed, there is no English word which renders it with any near approach to exactness. If therefore it is here rendered by the word "deity" ("deity" being preferred to "god" because it includes superior beings of both sexes), it must be clearly understood that the word "deity" is taken in a sense not sanctioned by any English dictionary; for kami, and "deity" or "god," only correspond to each other in a vary rough manner. The proper meaning of the word "kami " is "top," or "above'' and it is still constantly so used. For this reason it has the secondary sense of "hair of the haid;" and only the hair on the top of the head,--noth the hair on the face,--is so designated. Similarly the Government, in popular phraseology, is O Kami , literally "the honorably above"; and down to a few years ago Kami was the name of a certain titular provincial rank. Thus it may be understood how the word was naturally applied to superior in general, and especially to those more than human superiors whom we call "gods." A Japanese, to whom the origin of the word is patent, and who uses it every day in contexts by no means divine, does not receive from the word Kami the same impression of awe which is produced on the more earnest European mind by the words "deity" and "god," with their very different associations. In using the word "deity," therefore, to translate the Japanese term Kami we must, so to speak, bring it down from the heights to which Western thought has raised it. In fact Kami does not mean much more than "superior." This subject will be noticed again in Section V of the present Introduction; but so far as the word Kami itself is concerned, these remarks may suffice.
Translator's Introduction to the "KO-JI-KI," or Records of Ancient Matters, Section II, p. xx, Tuttle Publishing 1981. ISBN 0-8048-3675-2
Chamberlain certainly did his part to lay the question to rest a century ago, but given the translator's own description of the Kojiki as "a very dry piece of reading," the reason his insight has not gained wider currency is not at all unclear.