Okay, let me elaborate on the branding a bit more since it is a hot-button issue. First let me explain the fear of spirits and the rationale behind the brands. In this world, there are many violent and powerful spirits that DO cause destruction. Just like with people, you have friendly spirits, and malevolent spirits. However, with the ability to hide in human form, it is difficult to track them down and retaliate should they decide to hide. With the brand, it makes it impossible for these malevolent spirits to hide who they are. Plus, it puts people's minds at ease knowing that the person you are talking to is being honest about their species.
Now, many of you are comparing The Guild to magical Nazis. Let me make a few distinctions. First, and perhaps more importantly, is the fact that spirits are generally a lot more powerful than a human. This power dynamic means that mortals may want to know if they are walking up to something that could literally be their natural predator. Much of the fear of spirits derives from this very real imbalance of personal power. Second, no special legal restrictions are put on spirits once they accept the brand. The Jews in Nazi Germany had far more restrictions: they had to live in segregated communities, they had special curfews, they couldn't own automobiles, etc. No such restrictions are put on spirits. So, with that explained, I don't really see the scenario as analogous to magical Nazis.
With that said, yes, there are social consequences to the brand. Some mortals are just, believe it or not, racist. However, many others see those spirits who accept the brand as honest and forthcoming and would rather befriend the people with magical powers rather than piss them off. There is also resistance in the spirit community. Many see the brand as demeaning and insulting. As
@Narcotic Dollie pointed out, the forehead it prime real estate. Not everybody steps forward, thus the reason for The Guild. It should be noted, that spirits do have representation on the council, so they have political power as well and The Guild really does try to get spirits to comply before hunting them down.
I am well aware that good and evil are not clearly defined, even with all of this considered. I do not consider The Guild to be a bright and happy organization, but rather an organization doing dirty work for the sake of peaceful coexistence. It should also be noted that I love me some moral ambiguity.
So, with all that explained, if you guys still don't like the idea, I'm always open to suggestions.
Also, you mentioned griffins, orcs, and elves. Those are all extremely western fantasy races; orcs were codified in Lord of the Rings, and griffins originated in Greece and the surrounding areas. If your goal is to have a Japanese setting, you should exclude traditionally western races.
Well, based on the feedback I've been getting, both in the thread and privately, I decided to go with the hybrid fantasy option. This will be a fictional world containing elements from both Eastern (and not just Japanese) and Western fantasy. Even so, I'd still like to hear the ideas you have.