I think some of the comments here are a little misguided. It's very easy to scoff at this story from a modern perspective.
But think of it in the perspective of the time. Japanese soldiers were devoutly dedicated to their cause, their country and to their Emperor. This is a culture in which for soldiers, surrender was simply not thought of as an option - you either died fighting, or you took your own life; self preservation wasn't on the cards and you followed orders to the letter - even if it meant your own death.
Given the above, imagine you are then ordered to an already remote island with the sole purpose of cutting yourself off from the rest of the war effort to conduct guerilla operations. With no contact with your own side, and given the above devotion to the discipline of the Japanese military culture, you find it perfectly natural to consider your last orders as the bottom line.
When you take all this into account, then the fact that he believed he was still fighting the war is not as stupid as it sounds. If his only contact with the outside world was propaganda dropped by what he considered to be the enemy, then of course he wouldn't take it seriously.
Energize - sorry, but I don't buy your explanation that he was one some sort of murderous rampage, especially when you weight up the context. And he also wasn't the only Japanese solider who did the same. There were others who weren't discovered for years after the end of the war. This just goes to prove that this is what happens when you give fanatically loyal soldiers assignments which involve them basically being cut off and out of contact during an island hopping campaign across some of the most remote areas of the globe - it wasn't just one nutter who went Rambo and decided to pretend he didn't know the war had ended as some sort of cover up.
http://en.wikipedia.org/wiki/Japanese_holdout
Ultimate camper
It was the American's fault, they forgot to set a round timer.