While I agree with MMM, I think Akakage may have just highlighted the source of the misunderstanding.
Quote:
Originally Posted by Akakage
Amen to that!
Now behold the power of Wikipedia! It explains the subject of Gaijin quite nicely.
Gaijin (外人, Gaijin? IPA: [ˈɡaɪʥin]) is a Japanese word meaning "foreigner" or "outsider".
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"Outsider" in English has its own negative connotation. Its not usually someone merely unfamiliar, but someone shut out from the rest. So if people saw "outsider" as the translation for gaijin, rather than merely foreigner, I could see where it would be misinterpreted.