I'm pretty sure they're just doing racism.

Your idea of “racism” arose in that particular historical context and simply has no application to Japan. Japan didn’t bring a bunch of people to their country by force and then enslave them and deny them political rights for hundreds of years.

Nation-states not only exist, the UN recognizes their existence as a human right in the The International Covenant on Civil and Political Rights. The UN recognizes a right of “peoples”—groups of people bound together by culture, ancestry, language, etc.—to self determination. I was born in a country named after one ethnocultural group (Thailand) and my family is from another country named after our ethnocultural group (Bangladesh). Japan is the homeland of Japanese people, just as Thailand is the homeland of Tai people, and Bangladesh is the homeland of Bengali people.