The term 'postmodernist' is thrown about quite a bit these days. It's hardly surprising – the sometimes tiresomely self-aware nature of so much recent western TV and film material seems to be deliberately targeted at an audience who communicate in part by referencing popular culture, some of which – Buffy, The Simpsons, Spaced, etc. – is already steeped in pop cultural quotation. The self-referential nature of postmodernist cinema can extend to the very structure of the film itself, from a seeming awareness of the characters that they are in a film – as in Wes Craven's Scream series – to a complete disregard for the idea of keeping the filmmaking process hidden. At its most drastic, that substructure will intrude into the narrative, most recently exemplified by Michael Winterbottom's A Cock and Bull Story (in which the original novel is amusingly described as "Postmodernist before there was any modernism to be post about"), where the historical drama eventually gives way to the background story of its production, which itself includes an interview being conducted for inclusion as a special feature on the eventual DVD release (it was, too).

Although generally regarded as a relatively recent phenomenon, this practice of cinematic self-deconstruction was small-scale popular back in the 1960s, where it had less to do with targeting the short attention span audience, being more an expression of the influence of the avant garde and hallucinogenic drugs on a new breed of young filmmakers looking to shake off the traditionalist styles of their industry predecessors and break new artistic ground within the feature format. This was a time of radical change, of protest and experimentation in all walks of life and art, so why not cinema or even television? Often regarded as just a fun TV show built around a manufactured pop group, the cheerfully freewheeling and mildly anarchic style of The Monkees, for example, regularly included elements that would today be instantly identified as postmodernist. The concept was taken a few leaps further with its 1968 big screen incarnation, Head, when writer Jack Nicholson (yes, that one) and director Bob Rafelson threw artistic caution to the wind by fragmenting the narrative, employing graphics and editing techniques that drew attention to the filmmaking process, visually and aurally referencing a number of external media sources, and working in a critique of the very show and characters that they were presumably employed to celebrate. At one point, the film even stops when one of the cast is unhappy with his dialogue and the entire crew enters the shot to reset the scene and discuss how to proceed.

This sort of experimentation was by no means confined to western cinema. The very nature of experimental film as an outsider art form created a bond between its practitioners of all nations, each aware of the work of the other and inevitably influenced by them, and in the late 1960s the influence of the avant garde was starting to spill over into independent feature production. In Japan in 1969, you'll find no more striking example of this than Matsumoto Toshio's Bara no sōrestsu, or Funeral Parade of Roses.

Everything about the film seems to kick against established values, whether they be those of mainstream cinema or society at large, and to a degree that a staunchly traditionalist audience would still be outraged by even today. For a start, most of the lead characters are gay, and not quietly in-the-closet gay but flamboyantly and cheerfully so, and transvestites to boot. Most are played by gay men rather than trained actors (hooray!) and are portrayed as feminine rather than effeminate. The central character of Eddie, as played by the enigmatically named Peter (no surname), is so strikingly convincing that there are times when she – I use the feminine here deliberately and respectfully – really does look beautiful, and I'm talking from a (hopefully progressive) heterosexual male viewpoint. By this point, we should already have lost the self-proclaimed moral majority, but it doesn't end here. The story at the film's heart is a take on Oedipus Rex, Sophocles' everyday tale of patricide and incest, but with a twist here that is just guaranteed to offend the prudish. Oh yes, there are also some erotically charged gay sex scenes, a rejection of the traditional values of society, and an ending whose violence is so shocking I actually yelped out loud. Oh, it's great stuff.

On the surface, this is a tale of personal rivalry between Leda, the mama-san (the madam, if you will) of a Shinjuku gay bar, and Eddie, the most attractive of the bar's hostesses, both of whom are doting on drug dealer and bar regular Gonda. Their rivalry (and the film's break with cinematic traditions) is signaled early on as Leda looks in a mirror and the phrase "Mirror, mirror on wall, who is the fairest of them all?" pops up as a non-diegetic graphic, only to have Eddie appear behind her at that very moment. This love triangle plays almost as background detail to the everyday lives of Eddie and his friends, as they party, take drugs, make out, go shopping and work the customers in the Bar Genet. In another pleasing kick against expectations, the bar's patrons are a thoroughly manly bunch and not remotely effeminate, none more so than Gonda (emphasised perhaps by the casting of Yoshio Tsuchiya, most famous in the west for his role as the young Rikichi in Kurosawa's Seven Samurai). They also include a black US Vietnam war veteran, itself is unusual in a Japanese film of the period, but accurately reflective of the more international nature of Tokyo's Shinjuku district – renowned as the city's liveliest quarter – in which the bar is located.

Structurally, the film consistently plays games with film technique, fracturing the narrative in a way that invites a variety of possible readings. One sequence, for example, is repeated shot for shot later in the film, while another is interrupted mid-way by seemingly unconnected scenes, only to return later to the exact moment we left it. Are these memories, flashbacks, premonitions, or drug trips? Perhaps they're none of these – according to director Matsumoto, this approach was intended primarily to provide a Cubist view of the lives of its main protagonists.

Elsewhere, the experimentation is deliberately playful, with a wildly distorted video image of the quelling of student anti-war protests eventually revealed to be the result of a dodgy indoor aerial being deliberately manipulated for Guevara, the film's in-story filmmaker. A similar and equally successful trick is played later on, when naturalism jarringly shifts to a William Burroughs / Anthony Balch style cut-up sequence, an extract from one of Matsumoto's own experimental shorts that Guevara is playing for the gang. Brief, almost flash-frame shots can crop up anywhere, some seemingly abstract, some symbolic, some of them memories. Probably the most initially disorientating style shift occurs when the narrative is put intermittently on pause in order to interview the actors about their roles and their lifestyle, or to show the crew shooting the scene you have just been watching. In one respect, it's like having a DVD of a film, complete with the standard extras of cast interviews, behind-the-scenes footage and earlier short films by the same director, and seeing them blended into a single production.

But it works. And then some. Initially, the sudden shifts in style and tone can seem confusing and directionless, but as the narrative unfolds and a level of consistency is maintained, many of the seemingly abstract pieces fall into place. Certainly a second viewing clarifies a lot, and a few of the remaining gaps caused by temporal and cultural differences (a 2006 UK audience cannot really be expected to recognise a parody of a 1968 Japanese TV commercial after all) are usefully filled in by the detailed commentary track (more on that below). A variety of media is incorporated, including still photographs, performance art, quotation captions, a brief fake film trailer, and direct-to-camera critical comment. At one point, Leda and Eddie stand off in mock western gunfight mode armed with toy guns, and the ensuing trading of insults is displayed as manga-style speech bubbles, including a half censored word (subtitled appropriately as "c**t"). The look of the film is equally adventurous, with overexposure, strobe lighting, solarisation and a fair few other tricks used to sometimes deliberate and emotive effect.

It's rumoured that the film was a favourite of Stanley Kubrick's and that it had an influence on the look of A Clockwork Orange, which was released just two years later. Though this may be a stretch for the most part, there are certainly a few small but significant similarities, not least the speeded-up long shot of two drug dealers hiding their wares to the accompaniment of an accelerated version of The Can Can (reworked by Kubrick with the William Tell Overture for Alex's two-girl sex scene). It also shares with Kubrick's film a consistently offbeat use of source music, with a number of scenes engagingly mismatched with a fairground version of Ach Du Leiber Augustine, better known to American schoolchildren and Simpsons fans everywhere as the Hail to the Bus Driver song.

In the end, it's easy to see what would excite someone like Kubrick – a resolute outsider and a true visionary, working in an system that he somehow managed to force to dance to his tune – about a film that ticks almost every box of the Outsider Cinema check sheet. It's daring, exciting, innovative, shocking, funny, occasionally a little frustrating, but an absolute must-see for anyone who believes that true cinema should challenge and confront rather than simply placate.

This appears to be another of Masters of Cinema's licenses from Toho in Japan, adapted for the UK market with English subtitles on the film and extra features. As with some other Toho licences (The Naked Island, Humanity and Paper Balloons), the transfer is strong in some areas, but weaker in others. The strengths include the clarity of image and the clean print, which is excellent, but the trade-off is a sometimes narrow contrast range and black levels that fall more into the realm of dark grey. Once again, the intention appears to have been to preserve shadow detail – crank the brightness down on your TV and you'll get better blacks, but lose all detail in darker areas and scenes. Occasionally, the image has an overexposed look, but this is clearly a deliberate artistic decision by the director and his DoP – the suggested innocence of the dominant whites in the opening sequence, for instance, works particularly well, and looks great here. The picture is famed in its original 4:3 ratio. As with the simultaneously released Fantastic Planet, this is an NTSC disc, avoiding any conversion issues.

The original mono soundtrack betrays the age and low budget a little, with a very slight background hum and some clipped trebles, but is otherwise more than serviceable.

The subtitles are clear and largely well translated, though do sit a little high in the frame. Interestingly the borrowed-from-English Japanese phrase "gay boy" is translated on the extras as "gay man" but on the film as "queen."

The absolute prize here has to be the Commentary by director Matsumoto Toshio, which is conducted in Japanese but very well subtitled in English. Matsumoto is a busy talker and proves a wealth of detail on just about every scene, including the origin of all quotes, details on every guest appearance (and there are many), the specifics of how scenes were devised and shot, how individual people were cast, and the various cultural and media references, which frankly few if any would pick up on today without these pointers. He also explains some plot points that I completely failed to register even two viewings in, and the sheer volume of information provided here added greatly to my appreciation of the reasoning behind the film and its structure.

There's a Director Interview (22:54), also in Japanese with English subtitles, which although inevitably has some crossover with the commentary, does expand usefully on the information provided there, especially when talking about the casting process or his own influences and graduation to feature film production (this was Matsumoto's debut feature).

The Original Japanese Trailer (3:27) is an eye-opener in itself, from its opening 25 second silent, static close-up of Eddie, to the nudity and sensationalist sales pitch, promising that you will see "actual sexual perversion exposed!" Despite its age, I'd be surprised if even Queer as Folk would feature a trailer as erotically suggestive as this. One warning – it does include footage from the final sequence, which you should definitely not see in advance of the film proper.

The Poster Gallery contains reproductions of 10 of the original posters.

And finally we have the expected, typically well produced Masters of Cinema Booklet, which contains two detailed and interesting essays – in Timeline for a Timeless Story, filmmaker Jim O'Rourke examines the cultural lineage that led to the film, while Roland Domenig places it in the context of the Art Theatre Guild. These essays are particularly well selected as they build on rather than reproduce information found on the disc itself.

Funeral Parade of Roses is a splendid choice for the Masters of Cinema label, a film whose appeal is completely outside of the mainstream but which deserves a place in cinema history for its boldness of technique, plus its unashamed and warmly sympathetic approach to characters and situations that are too often the victim of idiotic caricature. Issues with contrast and black levels aside, this is another fine release for MoC, for the film itself and a richly informative commentary track. Recommended.