Japanese people are not generally speaking that hairy. Men have little to no chest hair for example. So guess it highlights the genitals even more.
And what Halx said. When US occupied Japan, they made new laws and pubic hair got outlawed. I attended a course on history of japanese film last semester and some guest lecturer said that McArthur & co had meant that "you are showing too much if the pubic hair is showing". Japanese have tendency to try to figure out why some request is made, how it makes sense and then fulfill it. So, they first thought that it's ok if you shave all.
Cos you couldn't show genitals or pubic hair, anime films used to be full of very young looking girls with underwear on and some aliens with tentacles were trying to rape their every cavity. Genitals are no-no, underwear is ok. Penis wouldn't be accepted, but look, it's a tentacle and not a male organ. What do you mean it looks like an erect penis? Japanese don't have homophobia in their culture to same measures as in the west and tere's little or no rules againt pedophilia. The girl characters in anime films could look really young like elementary school kids if officially they were university students.
...I'll stop this lecture now.
