Pretty good article in the Times today on how katakana is used. It mentions that foreigners of Japanese descent, like Alberto Fujimori and Kazuo Ishiguro get the katakana treatment on their names; what it doesn’t mention is that Fujimori, who pronounces his name Spanish-style, gets his name transliterated into kana as フヒモリ (fuhimori).
But the article overstates the standoffishness of katakana for foreign names. Katakana is used for loanwords in general, and for emphasis, and in that respect, it is very similar in function to italics in English. The fact that foreign names get swept up in katakana styling is not that big a deal.
The story reminds me of an anecdote that a friend told by back in Japan. This friend is of Japanese background, has a Japanese last name, and had been living in Japan for some time. She applied for, and got, a JCB credit card, apparently one of the first foreigners to do so. Now, credit cards in Japan always give the holder’s name in katakana; there would be no way of indicating on the card “we’re putting her name in katakana because it really belongs that way, not because of technical limitations.” So they left her last name off entirely, rather than risk having her be confused for a real Japanese.