Can confirm. The kanji literally means "horse deer foreign person". "Horse" + "deer" = idiot (baka), and also the "foreign person" part is written in an insulting way - "gaijin", which is shortened from the original "gaikokujin" (written 外国人, the part inbetween means country) that just means a foreigner, but in a rather neutral way. "Gaijin" could also be translated as outsider, but that's just because English has no word that would describe a foreigner in a negative way.
I can read Chinese (the first word is the traditional Chinese one) and it really means idiot foreigner. The last two letters is literally "outside person" or foreigner and the first two mean fool or idiot. So funny
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