It all comes down to what Japan is called. If you take the airline ANA or to give its full name, All Nippon Airways that will give you a clue. Nippon means Japan. I think it is something like 日本 in Japanese. Anyway the term Nip is just a shortened version of Nippon. Much in the same way Paki is a shortened version of Pakistan.
Until I know if it involved protestant squirrels or catholic squirrels I shall remain firmly on the fence.