In his series of books on the magical land of Xanth, Piers Anthony attributes panties with the ability to shock the male viewer. A view of them can cause a male of a certain age to "freak out" - anything from becoming disoriented to full loss of conciousness (depending on the guy, the girl, and, of course, the colour of the panties.
Japan, however, is no Xanth. The reports of used panties being sold in vending machines is true (there was one by my uni when I came on exchange), but the sight of them being worn doesn't seem to cause any sort of reaction. Nor does showing one's panties seem to be a big deal.
Case in point #1: My Brownies line up for a photo. The front row hunkers down on their heels, knees spread. Their uniforms consist of a blouse and skirt so I am constantly amazed when the other leaders don't say anything. Was I the only little girl taught to keep her knees together and her ankles demurely crossed? Or was that just my mum's traditional proper British background coming through?
Case in point #2: The uniforms of high and high school girls. The girls hike their skirts up high enough that walking up stairs, riding a bike, or even sitting down provide a full view.