This is not a happy book, but I think it is realistic - not because of the events it portrays but the way it portrays them. For most of the part we see only what Isaao Dazai sees and he creeps to understanding very slowly; the ending is largely unresolved. But - Yo! Dystopian! When was it ever gonna be happy? On the surface 'Black Sheep' is a story about racial segregation, with each city split into three - asian (where most of the action happens), african and caucasian. However in Asian Sydney, caucasians and africans are so remote that they might as well be aliens. Thus segregation occurs on a much finer scale - Asian Tokyo versus Asian Sydney. I think this probably illustrates that people will always look to find differences between each other, no matter how alike they apparently are. In 'Black Sheep' the only people who are truly the same are the 'Assimilated', bleached of all colour and self will.
The government's (and UN's) role in controlling the cities and enforcing the 'No Multiculturalism' rules remains shadowy, but is very reminiscent of George Orwells '1984'. The faceless 'Segregators' are not quite as omniscient the Thought Police, but they are in pursuit of thoughtcrime. It is not apparent if those in real control believe their own propaganda, or if they are using it to forward their own interests. One of the things I noted was that, even in this extreme society, the passage of time showed it becoming even more extreme. Things can always get worse...
Isaao Desai, a history teacher, is ambivilent about his home city, Asian Tokyo, and even more so about his adopted city Asian Sydney. He's a pawn in lots of games. The government uses him to test out new entrapment laws, his wife uses him to assuage her own guilt, while Peek uses him to explore the rights of the individual versus the benefit to society. Initially I found Issao a bit whiny and lacking in charm (possibly a little unsympathetic of me). However, ultimately I did care what happened to him and I am left worried that he'll get home ok.
In summary: well written and prose flows nicely. It's not as accomplished as 26 Lies/One Truth but, given 26 Lies is the more recent book, that's probably a good thing.
It's not clear if Australia as a nation or nationalism still exists. While there's mention of Australian languages, there's no mention of any of the other Australian capitals, suggesting that each city has become it's own separate enclave. Or perhaps Peek is Sydney-centric...
 I don't know that Peek would be very happy if he knew that every time I read 'Segregators', I thought 'Dementors'. The urge did lessen as I got further into the book :-)
I have one of the special not-formatted-quite-ezactly-right versions of the book. Knowing this, I found no difficulties in reading the text or following the story. If I didn't I might have been a bit more 'wtf??', but I'd have probably just attributed it to Art.