As they cross the island, they come upon a wrecked ship on the shore whose sails are rotted and its interior is covered with a mysterious mold. Murai, after reading the ship's log, warns them not to eat the mushrooms because they might be poisonous since the former crew had hallucinations after eating them. Finding that the mold is killed by cleaning products, they work to clear it from the ship. In doing so, they begin to suspect that the ship was connected to nuclear tests conducted in the vicinity of the island, with the resultant fallout forcing a bizarre mutation on various organisms native to the surrounding area, including the mushrooms. As the days pass, the group grows restless as their supply of food stores starts to run low. Kasai refuses to help find a way off the island and insists on living in the captain's quarters alone. One night, as Kasai is raiding the food stores, he is attacked by a grotesque-looking man who promptly disappears after encountering the group.
A drunk Yoshida decides to try eating the mushrooms for their hallucinogenic properties. After scuffling with Koyama over Mami, Yoshida pulls a gun and declares his intent to have his way with the women after murdering the others (accepting that if the mushrooms do turn him into a monster, then there will be no consequences for his actions). Subdued by the others, Yoshida is locked in the captain's quarters, ironically ousting Kasai. Kasai tries to convince Naoyuki to abscond together with the food and repaired yacht. Naoyuki violently rebukes this notion, but an unstated amount of time later hogties Kasai and flees with all the gathered food (including Koyama's secret stash that they had been hoarding to extort money from Kasai). Faced with this dire prospect, Mami frees Yoshida and they attempt to take over the ship, shooting and killing Senzō in the process. Murai and Kasai manage to take the gun from Yoshida and force the two off the ship. Some time later, Kasai is confronted by Mami, who entices him to follow her into the forest and eat the mushrooms. Perpetual rainfall has caused wild fungal growth, and Kasai realizes that those who have been eating the mushrooms have turned into humanoid mushroom creatures themselves. The mushrooms are delicious and cannot be resisted after the first bite. Kasai eats the mushrooms, hallucinates scenes of Tokyo nightlife, and falls to his knees amongst the creatures.
Murai finds the yacht adrift and swims out towards it. He finds a note left behind by Naoyuki listing the names of those on the island as dead and how, having now run out of food and energy, he has decided to jump into the sea. Murai draws a large X over the note. Others who have turned into mushroom creatures attack Akiko and Murai. They are separated and Akiko is kidnapped. As Murai tracks her down, he discovers that she has been fed mushrooms and is under their influence along with Mami, Yoshida, and Kasai. Murai attempts to rescue Akiko, but he is overwhelmed by the mushroom creatures and flees without her, making his way onto the yacht and escaping the island. Several days pass later, Murai is finally rescued. As he waits in the hospital, he begins to wonder if he should have stayed with Akiko on the island. His face is revealed to show signs of being infected with fungal growths. Murai states after that it did not matter whether he stayed or not, but he would have been happier there with Akiko. The screen fades as Murai notes that humans are not much different from the mushroom creatures.
The script was relatively faithful to Hodgson's story, but added a number of extra characters. Honda was also inspired by a news story about a group of rich kids who took their father's yacht far into the sea and had to be rescued. Early drafts featured characters paralleling their real-life counterparts, as well as reports of ships and aircraft vanishing in the Bermuda Triangle.
The film was released on home video in the United Kingdom in the 1980s under the title Fungus of Terror. Media Blasters issued Matango on DVD in the United States on March 15, 2005. It featured a generous selection of extras, including commentary by the film's male lead, Kubo, production sketches, an interview with special effects team member Teruyoshi Nakano, and other features. Tim Lucas of Sight & Sound described Tokyo Shock's release of the film as "a revelation to those of us who grew up watching pan-and-scanned, re-edited bastardisations of these films on television". Lucas also noted that "Matango looks splendid on Tokyo Shock's disc, its anamorphic transfer retaining the naturalistic colour of the earlier Toho Video laserdisc release with brighter contrast and a slightly more generous (2.53:1) screen width". He felt that "the English subtitles access adult dimensions of the story that were never apparent in the old television prints". Toho released the film on Blu-ray in Japan on November 3, 2017.
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