Gunsel? (Spoilers)
In the previous collaboration with actor Humphrey Bogart and director John Huston, The Maltese Falcon, Bogie's character Sam Spade referred to the hired gun Wilmer Cook as a gunsel. The censors let it pass on the assumption that gunsel was a term for a gunman, but in reality it is a Yiddish homosexual slur. In this film, Smith tells Rick that Joe Totsuiko is a Japanese gunsel. The line struck me as odd because it seems to be taken out of context; as if it were accepted at face value that it referred to a gunman.
If you look at The Maltese Falcon's Joel Cairo, the character is effete, well-dressed, articulate, and slightly self-absorbed. Joe displays none of these attributes which were associated with homosexuality at the time. Additionally, he made his interest in women known at least twice. Now, it's possible that Smith was simply taking a verbal shot at his masculinity, but this too would be out of context in that he had just finished talking about how tough Joe was.
The only thing that I could figure is that Bogart's gunsel line from The Maltese Falcon was ad libbed, that John Huston believed it was a term for gunman (and consequently liked the sound of it), and that Bogie never bothered to correct Huston on what the term really meant.