外人 vs. 外国人

外人 (gaijin) vs. 外国人 (gaikokujin). What's the big difference?

Since it came up again the other day, I thought it'd be useful to truly explain the difference to anyone who is not familiar with the terms. Kanji tends to be pretty literal, so sometimes you might miss the little implications of a word. Both gaijin and gaikokujin mean "foreigner," but the meaning depends on where one is in Japan, who they're talking to, and what age the person is in relation to oneself. Let's take a quick look just for a linguistic point-of-view.

A gaijin is literally a "foreign person." Some Japanese will find it not to be offensive, and they'll use the word frequently. It's shorter, easier to say, and you do hear it quite a bit in daily conversation. However, I feel that the majority of people would still label this a discriminatory term. Oddly enough, there seems to be this weird trend among foreigners to use this term to refer to themselves. If they make a mistake, they'll say something along the lines. "Oh, it's ok because I'm a gaijin." There's even a phrase that has popped up called the "Gaijin Smash." Used by foreigners, it refers to doing something that one knows is frowned upon or illegal and getting away with it due to the fact that one is foreign. For this reason, the Japanese are somewhat at a loss. Even though many of them feel that it's discriminatory, they can't seem to get rid of the term because the people who should feel discriminated against keep using it to refer to themselves.

On the other side of the argument is gaikokujin, which means "a person from a foreign country." Across all boards, this word is considered more polite, but it's also considered more formal.

So, there's a problem. Which to use? The one which is considered a form of 差別 (sabetsu), discrimination by many? Or the word which many will agree is more polite, but sounds a little formal between friends? It's up for debate, but this writer's opinion is for using 外国人, gaikokujin.