How does this で work?

Question

日本女性で電車の中で化粧をする人を見ると恥ずかしいくて嫌な気持ちになる。

In my understanding, the で following 日本女性 could correspond here to the english "of," or "speaking of." Thus one interpretation of this sentence (though in unnatural english) could be:

Speaking of Japanese women, seeing someone put makeup on in the train makes me embarrassed and uncomfortable.

Is this interpretation correct?

For the sake of comparison, here are two other interpretations of this sentence made more natural. Hopefully the meaning does not differ greatly.

When I see Japanese women putting makeup on in the train I feel so embarrassed and uncomfortable

Seeing Japanese women putting makeup on in the train makes me embarrassed and uncomfortable.

Answer 1

The most likely interpretation is that this で is short for であり, or であって. This usage of the stem (連用形) or te-form is usually translated as and in English (although there are significant differences).

日本女性で電車の中で化粧をする人
'a person who is a Japanese woman and puts makeup on the train'

Another possibility is that this で is short for のうちで 'within, among'.

日本女性で電車の中で化粧をする人
'among Japanese women, those who put makeup on the train'

Your quotation is probably taken from a very conservative and somewhat nationalist person who thinks that Japanese women are (expected to be) more elegant and well behaving than women living in other areas. If this is the case, then the first of the interpretations that I gave is the correct one.