After helping out with yet another English related problem...
N: Ah, arigatou! Gaijin-san da ne!
R: Grrr I hate that word.
N: What? Gaijin?
R: Yeah. Like, why don't you just say American.
N: Gaijin just means foreigner yo.
R: I know, but we're not all the same. There are Americans here, and Canadians, and Brits, and Indians, and Chinese people, and Koreans...
N: Don't you call us foreigners?
R: No...because you're Japanese and this is Japan.
N: Foreigner just means foreign person. So I'm foreign to you.
R: But you can't be a foreign person in your own country. So, if you go to America then you'd be a foreigner. But I'd still call you Japanese first. If you came to America would you call me a foreigner?
N: Yeah!
R: Uh...
I'm starting to think the real meaning of gaijin is "everyone who's not 100% Japanese and born in Japan"...