Futanari (ふたなり, literally: [to be of] two kinds) is the Japanese word for hermaphroditism, which is also used in a broader sense for androgyny.
Beyond Japan, the term is used to describe a commonly pornographic genre of eroge, comics, and anime which includes characters that show both primary sexual characteristics. In today’s language it refers almost exclusively to characters who have an overall feminine body, and have male genitalia (although sometimes may also have both male and female genitalia). In that case the term is also often abbreviated as futa(s)
Historic origins

Stones (with Shimenawa) representing Dōsojin found near Karuizawa, Nagano
Japanese folk religion created diverse fantasies related to sexual characteristics. Traditional vocal pieces that date back hundreds of years deliver rough evidence that a change of gender was not ruled out and that the representation of the gender was used to worship deities such as dōsojin which sometimes had ambiguous gender, being neither male nor female. Leupp adds that the origins might even reach back to the origins of Buddhism, since the deities would not necessarily have a fixed or determinable gender.

Likewise the belief spread that some people could change their gender depending on the lunar phase. The term half-moon (半月 hangetsu) was coined to describe such beings. It is assumed that traditional clothing, which made it more difficult to distinguish men from women like in other cultures, might have had an influence on this development. To restrict women from accessing prohibited areas and to avoid smuggling by hiding items in the belt bag, guard posts were assigned to perform body checks.

In historical records, it can be seen that guards liked to joke about this matter quite frequently, resulting in various stories and even poems. Whether anatomical anomalies, like clitoromegaly or unusual physical development, led to these assumptions remains an open question.
Until 1644, when onnagata actors were required to adopt male hairstyles regardless of the gender they were portraying, actors playing characters like female warriors capitalized on the interest in the futanari quality, which was common in both samurai and commoner society.

In anime and manga
Originally the Japanese language referred to any character or real person that possessed masculine and feminine traits as futanari. This changed in the 1990s as drawn futanari characters became more popular in anime and manga. Today, the term commonly refers to fictional (drawn), female looking, hermaphrodite characters. Futanari is also used as the term for a specific genre within hentai related media (pornographic anime or manga) that depicts such characters.
To differentiate between fictional characters and real trans women, the Japanese language adopted the English-style term newhalf nyūhāfu , which is used for the latter.

Futanari manga gained somewhat of a following in the 1990s and quickly became a small, yet, pervasive part of the industry, cross-pollinating with multiple genres. Toshiki Yui’s Hot Tails has been described as the best known example of the genre in the West.
In anime aimed at a broad audience, the gender bender or cross-dressing storylines have always been popular. Popular examples include anime such as Ranma ½, Kämpfer and Futaba-Kun Change! (in which the main character changes from male to female) and I My Me! Strawberry Eggs (which takes on a more cross-dressing theme). And as well Wagaya no Oinari-sama.

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