The tarpaulin covers have been meticulously erected, but they can't completely mask the brutality of the slaughter unfolding below. Even from the clifftop, it is possible to hear the hunters' voices and the thrashing of tail fins as their prey make a final, fruitless bid for freedom.

Occasionally a hunter emerges into the gaps between the covers, grimacing as he plunges his knife into the water. Minutes earlier the sea around him was emerald green. Now it is turning a deep crimson, the morning air tainted with the stench of freshly drawn mammal blood.

The gruesome spectacle of dolphins being slaughtered for profit has returned to Taiji, just as international condemnation of the Japanese town's annual cull reaches a crescendo. At least 100 bottlenose dolphins and 50 pilot whales have been taken in the first hunt of the season, which began on 1 September.

Over the next six months the town's fishermen will catch about 2,300 of Japan's annual quota of 20,000 dolphins. The meat from a single animal fetches up to 50,000 yen (£330), but aquariums are prepared to pay up to £90,000 for certain types.

In a typical hunt the fishermen pursue pods of dolphins across open seas, banging metal poles together beneath the water to confuse their hypersensitive sonar. The exhausted animals are driven into a large cove sealed off by nets to stop them escaping and dragged backwards into secluded inlets the following morning to be butchered with knives and spears. They are then loaded on to boats and taken to the quayside to be cut up in a warehouse, the fishermen's work hidden from the outside by heavy shutters.

Taiji officials said all the pilot whales caught on this expedition had been killed and their meat put on the market, but added that half of the bottlenose catch would be sold to aquariums and the remainder "set free", in an apparent attempt to mollify international opinion.

It is impossible to verify those claims. The bottlenose dolphins were still penned in close to the shoreline more than 24 hours after they had been captured.

Guardian photographs taken covertly during the cull show what appears to be a young bottlenose floating, motionless and belly up, just beyond the slaughter zone.

What is clear is that a siege mentality has taken hold in Taiji, an isolated town of 3,500 on the Pacific coast of Wakayama prefecture.

Tensions have been rising and the culls conducted in near-secrecy since 2003, when two members of the marine conservation group Sea Shepherd released several dolphins that were being kept in an enclosure ready to be slaughtered.

During our visit we were followed at almost every turn, ordered not to take photographs and questioned by the police, who seem to view every foreign visitor as a potential hunt saboteur. None of the residents who agreed to talk would reveal their names, and requests for comments from the town office were ignored.

Criticism of the dolphin hunts intensified this summer with the release of the award-winning US documentary The Cove, whose makers used remote-controlled helicopters and hidden underwater cameras to record the hunters at work.

The film, with its graphic footage of the dolphin slaughter, sparked outrage after its release in the US and Australia. Last month councillors in the Australian coastal town of Broome suspended its 28-year sister-city relationship with Taiji after receiving thousands of emails protesting at the culls.

Taiji is regarded as the spiritual home of Japan's whaling industry. The first hunts took place in the early 1600s, according to the town's whaling museum, but the industry went into decline after the introduction of a global ban on commercial whaling in 1986.

The town, a six-hour train ride from Tokyo, is dotted with restaurants serving whale and dolphin sashimi and cetacean iconography appears on everything from the pavements and bridge balustrades to road tunnels and a wind turbine.

Yet in other respects it does not have the feel of a town that takes pride in its traditions. Last week's pilot whale cull was conducted in inlets shielded on three sides by steep cliffs and dense undergrowth to deter campaigners and journalists. Barriers have been hastily erected along coastal paths that run through publicly owned land.

Local fishermen point out that the dolphins and other small cetaceans are not covered by the whaling moratorium. What critics regard as the senseless slaughter of intelligent creatures they see as a legitimate exercise in pest control, blaming dolphins for decimating fish stocks.

"People say dolphins are cute and smart, but some regions have a tradition of eating dolphin meat," said Toshinori Uoya, a fisheries official. "Dolphin-killing may be bad for our international image, but we can't just issue an order for it to stop."

The hero of the film is Ric O'Barry, a 69-year-old activist who has waged a one-man campaign against Taiji's dolphin culls for more than a decade. "We have to keep Taiji in the news," said O'Barry, who trained dolphins for the 1960s TV series Flipper before devoting himself to their conservation. "There is an international tsunami of attention.

"I've been working with dolphins for most of my life. I watched them give birth. I've nursed them back to health. When I see what happens in this cove in Taiji, I want to do something about it."

To many Taiji residents, O'Barry's comments typify the hypocrisy they say lies at the heart of mounting fury at their centuries-old tradition of killing whales and dolphins.

"I think we are the victims of a form of racism," said one, as we watched the pilot whales being herded out of sight to be killed. "Westerners slaughter cattle and other animals in the most inhumane ways imaginable, but no one says a word. Why is it that only Japan gets this kind of treatment?"

The Cove will be released in the UK on 23 October.