check the settings i put below , or test the up down left right, by disconnecting the joystick and replacing each input with a pushbutton and then test them all if you get an output its the harness or joystick, if you dont its the setup/ipac, havent seen a joystick like that for real (i`m using cheap ones

) , just guessing they`re 4 prewired micro switches to a connector, sounds like its a dodgy ground in there as it would be just one output not working, can you take it apart and do a continuity test? probably just a solder joint.
the settings i have on the screen youre showing
1 up - UP 1 down - DOWN prev list - LEFT Next list - RIGHT
X up - UP(+shift) X down - DOWN(+shift) prev emulator - LEFT(+shift) next emulator - RIGHT(+shift)
shift key - CTRL
the ones your showing dont seem to make sense to me but i dont know how your running your control panel only saying it doesnt make sense as according to your setup, when you try to scroll down your in list of games, mala is also trying to change emulator, and when you try to scroll up the list its also trying to X scroll up.
ps if the writing is in blue it means that input was activated while the `shift`key (+shift) is held down, caught me out in the setting up