The way that Japanese treat outsiders is so far from the popular Western ideal of what 'racism' means that I'd argue the term barely applies.
'Racism' is a loaded term that has little meaning in most situations because it entirely depends on context.
Sure, if someone is calling a black guy the n-world, well then yes, we can safely use that term.
But if we consider that the vast majority of the world is inherently ethnocentric, then term 'racism' as a hard pejorative can only effectively be used in New World / Western / Anglosphere contexts, as elsewhere it would have an entirely different meaning.
The paradox of 'diversity' is that culture and ethnicity are the root basis of differentiation in this world, and without it, there literally is no 'diversity' - and yet, any general ideal which recognizes ethnicity is deemed 'racist' (in the pejorative sense), usually by New World / Western / Anglosphere types who generally lack perspective, in my view.
So, yes, Chinese treatment of non-Han types may be 'racist' in the ugliest sense, but it requires far more nuance than this simple term can imply.
The very essence of 'diverse' ideals should be founded upon respecting the fact that other groups have a different view of the world (and have different histories) than 'we' do; instead, we all to often end up with ideals of 'diversity' which amount to 'diversity of skin colour and last name' and utter conformity on all other levels.
The way the Japanese treat outsiders needs a whole other term of it's own, really.