A lot of it is thanks to the videotape boom of the 1980s. Since videos were less restricted by film industry censorship than theatrical movies and TV were, a huge number of super-violent, disturbing, ugly movies appeared regularly on shelves. They were massively controversial, especially in the UK (look up "video nasty"), but they were also massively popular among teenagers, college kids, and underground movie aficionados- to the point where some such movies became household names to this day: Faces of Death, Cannibal Holocaust, and The Evil Dead were just a few of the movies that became famous thanks to their video releases.
This phenomenon wasn't exclusive to the West- in Japan, basically the same thing was going on, though I don't personally know if there was as much public controversy. Regardless- a lot of nasty, nasty videos were coming out in Japan, and a lot of them were selling VERY well. So well, that naturally, American distributors took notice. They grabbed the goriest, nastiest, sexiest, or/and(!) most depraved Japanese movies they could find and plopped them in American video stores. Probably the most famous one of these was Legend of the Overfiend, which got rave reviews in the arthouse-cinema scene before debuting on video, and is the movie that made "tentacle porn" famous.
Now, the American mainstream always saw these counter-culture video tapes as being porn. Porn, after all, was the OTHER market that got fat on VHS, and this was still a time where dubbing something as "porn", however incorrectly, was an easy way to make people hate it. Never mind that a lot of those movies were incredibly unerotic- "only total sickos would actually like these movies, and we already know that total sickos LOVE to masturbate to murder!" (Granted, many of these really WERE porn in, but a lot of others just happened to have nudity in them, which Americans only seem to see in a sexual context.) And when people took a look at all these shocking cartoons (which got special attention because cartoons, OBVIOUSLY, are only for children, so they were seen as trying to sell video nasties to kids!!!), they noticed that all of them had Japanese names in the credits... but there were no Japanese movies coming out here that WEREN'T depraved! Thus, the mainstream decided that "all Japanese people masturbate all of the time everywhere".
This phenomenon wasn't exclusive to the West- in Japan, basically the same thing was going on, though I don't personally know if there was as much public controversy. Regardless- a lot of nasty, nasty videos were coming out in Japan, and a lot of them were selling VERY well. So well, that naturally, American distributors took notice. They grabbed the goriest, nastiest, sexiest, or/and(!) most depraved Japanese movies they could find and plopped them in American video stores. Probably the most famous one of these was Legend of the Overfiend, which got rave reviews in the arthouse-cinema scene before debuting on video, and is the movie that made "tentacle porn" famous.
Now, the American mainstream always saw these counter-culture video tapes as being porn. Porn, after all, was the OTHER market that got fat on VHS, and this was still a time where dubbing something as "porn", however incorrectly, was an easy way to make people hate it. Never mind that a lot of those movies were incredibly unerotic- "only total sickos would actually like these movies, and we already know that total sickos LOVE to masturbate to murder!" (Granted, many of these really WERE porn in, but a lot of others just happened to have nudity in them, which Americans only seem to see in a sexual context.) And when people took a look at all these shocking cartoons (which got special attention because cartoons, OBVIOUSLY, are only for children, so they were seen as trying to sell video nasties to kids!!!), they noticed that all of them had Japanese names in the credits... but there were no Japanese movies coming out here that WEREN'T depraved! Thus, the mainstream decided that "all Japanese people masturbate all of the time everywhere".