Meanwhile in the Pacific, Bugs is seen floating inside a box, singing to himself. He encounters an island, which Bugs then swims towards it, and praises the peace and quiet, until when bombs start going off. Which Bugs ducks into a haystack, which he then comes face to face with a Japanese soldier. The soldier chases Bugs all the way to a rabbit hole, where the soldier dumps a bomb inside. However, Bugs manages to blow the soldier up with the bomb that he used. When the soldier tries to swing a sword at Bugs, Bugs appears as a Japanese general, but is soon recognized by his trademark carrot eating, prompting the soldier to ask him "What's up, Honorable Doc?"
Bugs then jumps into a plane and the soldier also jumps into a plane. However, Bugs ties the soldier's plane to a tree, causing the plane to be yanked out from under him. The soldier parachutes down, but is met by Bugs in mid-air, who hands "Moto" some 'scrap iron' which caused the soldier to fall. Bugs then paints a Japanese flag on a tree to denote one soldier down, Bugs runs into a sumo wrestler, whom he confidently faces off against. After getting temporarily beaten by the sumo wrestler, Bugs then dresses as a geisha girl to which he then knocks the wrestler out, who repaints a second flag on the tree before passing out.
Seeing a bunch of Japanese landing craft making their way to the island, Bugs thinks of a plan to get rid of all of them. He comes out in a 'Good Rumor' truck, which plays Mozart. Bugs hands each of the Japanese an ice cream bar with a grenade inside it, calling them racist slurs whilst doing so. All the Japanese are then killed off from the explosions, except for one who was later killed after redeeming a 'free' ice cream bar from Bugs. Now Having painted dozens of Japanese flags on the trees denoting all the downed enemy, Bugs comments again about the 'peace and quiet to which he says "and if there's one thing I CAN'T stand, it's peace and quiet!"
Bugs spots an American battleship in the distance and raises a white flag, yelling for them to come get him, but they keep going. Bugs is then furious about it and then says "Do they think I want to spend the rest of my life on this island?" With this remark, a female rabbit dressed in a more Hawaiian outfit appears saying, "It's a possibility!" Finally, Bugs then pulls down the distress flag, lets out a wolf cry and goes running after her.
- The Golden Age of Looney Tunes Volume 1, Side 7, Bugs Bunny by Each Director (LaserDisc, MGM/UA)
- The Golden Age of Looney Tunes Vol. 7: Bugs Bunny by Each Director (VHS, MGM/UA)
The release of this cartoon on the VHS caused a controversy. The Japanese American Citizens League protested the short's inclusion on the Bugs Bunny by Each Director tape. They felt it was inappropriate to market it among the more standard, family-friendly tapes. While MGM/UA initially defended their decision, they later voluntarily pulled the tape and the box set containing it from distribution. Later printings of The Golden Age of Looney Tunes Volume 1 LaserDisc set replaced the short with "Racketeer Rabbit".
As fans eagerly awaited new video releases, in early February 1995 an older title made headlines across the country. The Japanese American Citizens League was taking MGM/UA Home Video to task over its two-year-old video cassette The Golden Age of Looney Tunes Volume 7: Bugs Bunny by Each Director for its inclusion of the wartime Bugs Bunny Nips the Nips.
"It hurts because a large corporation is so insensitive to rerelease this type of video to children," explained JACL spokesperson Lori Fujimoto in a television interview. Though nothing was said of the larger LaserDisc boxed set that originally featured the cartoon, members of the organization felt it was inappropriate to market the stand-alone cassette alongside other family-friendly Looney Tunes releases.
MGM/UA was sympathetic but nevertheless stuck to their guns on the philosophy of the Golden Age of Looney Tunes series. In a statement to the press, spokesperson Anne Corley said, "When we were compiling the video, we were putting together a history of animation. As much as it is distasteful, it was part of history at the time and reflected Hollywood's part in the war effort." Among the reported eight thousand copies of the video that had been sold, MGM/UA claimed they had only received one complaint. 
Although the collection had been out since 1993, the controversy over it erupted only late last month, when a Sacramento resident who watched the Bugs Bunny tape with his grandson notified the local Japanese American Citizens League.
"It was pretty bad, very offensive," Michael Sawamura, the league chapter's civil rights vice president, says of "Bugs Nips the Nips," which was made in 1944. "The title itself should have been a red flag to someone."
In that selection, one of about a dozen Bugs Bunny episodes that make up the Looney Tunes set's seventh volume, the wisecracking rabbit is shipwrecked on an island with Japanese soldiers, Sawamura says. His characteristically "hare-raising" antics include giving the caricatured soldiers hand grenades disguised as ice cream cones.
"He is in his truck and as he is passing the ice cream out, Bugs Bunny says, Here, Jap. Here, monkey face. Here, slant-eyes,' " Sawamura said. "He also uses the term bow-legged." 
"Bugs Bunny Nips the Nips" is considered to be one of the most offensive wartime Warner Bros. cartoons in history, even more so than "Herr Meets Hare" and "Daffy - The Commando". As a result of the LaserDisc withdrawal, Turner Entertainment banned the cartoon from television syndication in 1993 and is still banned to this day (even plans to have it air on the 2001 June Bugs that was supposed to have every Bugs Bunny cartoon ever made fell through when AOL Time Warner announced that 12 Bugs Bunny cartoons featuring racial stereotypes were going to be shelved. It was also going to air on a ToonHeads episode about the 12 banned Bugs shorts, but the series was canceled and the episode was shelved). The cartoon saw limited broadcast on Toonheads during a special on World War II cartoons, but they were mostly clips. Since the cartoon has no Turner "1995 dubbed version" ending card, it is assumed to be banned from syndication permanently much like the Censored Eleven (although the cartoon itself was never been part of The Censored Eleven list to begin with).