(FORTUNE Magazine) – The tight-knit Japanese share an almost tribal bond that often hobbles their dealings with the rest of the world. Just last month Kengo Tanaka, president of the respected publishing house Bungei Shunju, spent more than two hours publicly apologizing for offending many foreigners. His company's magazine Marco Polo (with a circulation of some 200,000 among young Japanese men) had run a ten-page article about a "new historic truth"--namely that the Holocaust, which wiped out millions of European Jews during World War II, never happened. In the wake of the outcry that the piece provoked, Tanaka shut down the magazine, noting in his defense: "Japanese history and culture are so widely different and removed from those of the Jews."

That flap was no isolated incident, how- ever. For years, anti-Semitic books purportedly disclosing the existence of global Jewish conspiracies not only have sold well in Japan but have also been treated as plausible by mainstream journalists and politicians.

Why are the Japanese so obsessed with Jews, only about 1,000 of whom live in Japan today? In Jews in the Japanese Mind (Free Press, $24.95), university professors David G. Goodman and Masanori Miyazawa perceptively explore this question. Their answers will fascinate anyone interested in this island nation's culture and will especially intrigue Western business executives who have so often run head-on into the roadblock of Japanese exceptionalism.

In essence, Goodman and Miyazawa argue that Japan's Jewish thing stems from its 1,000-year-old tradition of manipulating images of foreigners to define "Japaneseness," a cherished sense of themselves as a unique people. Outright racism is the dark side of what the authors politely describe as Japan's "ethnic nationalist xenophobia."

Uneasy about an estimated 300,000 illegal immigrants who do much of the dirty work in Japan, the National Police Agency has circulated a memo warning that Pakistanis have "a unique body odor" and carry infectious diseases. A senior executive at a leading Japanese company once earnestly asked me: "Why do you Americans worry so much about blacks when they are only a small minority?" That was a private echo of Prime Minister Yasuhiro Nakasone's infamous 1986 comment extolling the virtues of Japan's "monoracial society" and contending that blacks and Hispanics lower the level of intelligence in the U.S.

What comes through clearly in Japan's attitude toward Jews, however, is how little this kind of prejudice has to do with personal animosity--and how much it is rooted in the Japanese need to establish the "otherness" of everyone else on earth. Even as an ally of Nazi Germany in World War II, Japan protected the Jews under its control. Inuzuka Koreshige, a navy captain responsible for some 24,000 Jewish refugees in Shanghai from 1939 to 1942, explained why he gave them sanctuary in ethnocentric terms: "In the final analysis, the Jews, who are Asiatics, will have no choice but to live under the guidance of Japan."

This nationalistic attitude reflects a theory, spread by Japanese Christian theologians in the 1930s, that the Japanese and the Jews sprang from a common ancestry. That notion appealed in part because it made the Japanese a chosen people--and provided a handy justification for imperialism. Nakada Juji, the son of a samurai who studied at the Moody Bible Institute in Chicago, came home to preach that even Japan's military forces were playing a divine role.

In reinventing themselves after World War II, the Japanese strongly identified with the Jews as innocent victims. The Diary of Anne Frank, written by a German Jewish girl who hid from the Nazis in Holland, became a crucial icon of postwar Japanese culture. So popular was the book among adolescent girls that a maker of sanitary napkins called itself Anne Co. On a more profound level, that diary, the authors contend, "enabled the Japanese to relate to the Holocaust and World War II without having to consider hard historical realities"--specifically, their own brutally aggressive acts in places like China and Korea.

The emergence of Japan as an economic superpower in the 1980s fueled national pride--and a boom in anti-Semitic books. Sold in "Jewish corners" of shops, these popular exposas of various Zionist plots to wreck Japan were purveyed not only by crackpots but also by scholars and prominent politicians. They blamed the rise in the Japanese yen, the fall of the Tokyo stock market, and much else on Jewish manipulators. This "eruption of darkness," the authors conclude, may not lead to actual anti-Semitic acts in Japan. But it surely contributes to grossly distorting the country's world view. As long as it prevails, it will continue to hamper the Japanese people's ability to grapple effectively with the realities of the larger world stage on which they must inevitably now play.