Spaghetti wrote: Yeah I'm not sure the character fades in, just that Ryo is obscuring them for the first part of that shot.
Okay, false alarm.
I downloaded the high quality version and stepped through it frame by frame. It was just a video compression artifact from YouTube, he comes into view kind of blurry for the first couple of frames. Now I see there's even a guy walking down from the top of the stairs on the right too, so the NPCs are definitely visible from a fair distance away. No pop in, sorry for the mistake.
I hope someone else does a more detailed comparison. Looks like there might be some better motion blur during the Chai fight?