Naja, das kommt ja auf die Gesprächssituation an. Wenn deine japanischen Kollegen dabeisitzen und Du von den 'locals' redest, dann ist das alleine deshalb beleidigend, weil es in der dritten Person über Anwesende gesagt wird.
Generell ist das Wort 'locals' aber nicht beleidigend, das wird ständig verwendet, um Leute zu bezeichnen, die irgendwo wohnen und die Gegend deshalb besser kennen, z.B. auch in Reiseführern.

Agree with #1. The word itself is completely okay - local staff, local residents - but could easily be used by someone with a condescending attitude. It's the attitude that's the problem, not the word. If you were saying, for example, that the company depends on local people with local knowledge, that, I believe, would be a positive message.

Thank you for your input!

For some reason, I haven't had any doubts using "local" as an adjective (as in "local residents" in Jo's example). It's just the "local" as a noun that makes me hesitate.

Yes, the attitude is the real problem, not the word (by the way, I absolutely don't think that my colleague has any negative thoughts about our foreign colleagues). Still, generally speaking, it may be difficult to communicate a positive attitude if you, as a foreigner, make the mistake of using a word that gives native-speakers a negative feeling, especially in writing. That's why I wanted to know if the word "local" is "safe" to use! :-)

Your gut instinct is right on. It's not a red-flag word, but it does often have a condescending overtone. It can easily connote small-town thinking, rural ideas, limited horizons.

If you need a neutral, safe word, stick with the adjective – local employees, people with local knowledge. Alternatively, use a more exact description – Japanese employees, people in the Japanese office.

Casually also perhaps – people on the ground, people there on site in Japan, as opposed to those far off in the home office.