It is a racist term. Certainly the majority of Jewish people consider it racist, although they may use it amongst themselves as black people use the 'n' word amongst themselves.
In this case my understanding has always been that this particular chant was started by Arsenal fans as a term of abuse because there are Jewish communities near WHL and Spurs are perceived to have a lot of Jewish fans. Back in the 70s I remember songs being sung on the Kippax about gas chambers when we played Spurs. I thought that pretty distasteful.
As it happens Arsenal have quite a lot of Jewish fans too, but in both cases they're a minority. Spurs took to chanting it themselves because they didn't actually care and it gave them something to chant back. The majority of fans of whichever club chanting this are unlikely to actually be Jewish.
I don't know, but I wouldn't be surprised if it caused some internal controversy, much as chants about a town in Bavaria do with us.