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Academy students:
The academy is where would-be ninja start; they are not actually considered ninja until they graduate. Academy students take formal and practical tests of all sorts and are taught basic ninja skills, such as martial arts, techniques, physical fitness and the way of the ninja. Basic weapon usage, such as kunai and shuriken, is commonly taught. Elementary ninja techniques, though they vary from village to village, are also taught. These include the Transformation Technique, Rope Escape Technique, Body Replacement Technique and the Clone Technique.
Upon graduating, students receive a special band of fabric with a metal bar bearing the symbol of their village, which is commonly referred to as a "forehead protector" or hitai-ate, although it can be worn in different ways. Some villages also have an additional test given by the Jounin sensei of each three-man squad to see if they are truly ready to graduate, such as Kakashi Hatake's bell test, which determines whether the squad can work as a team. To ensure that only truly qualified ninja are promoted, only three Genin teams are allowed to pass. The test for determining which three teams may become Genin are administered by each team's respective Jounin commander, and vary depending on the Jounin.
What is required for graduation varies from academy to academy. In Konoha, the graduation exam is composed of some sort of written test, as well as demonstration of basic techniques.
A note - I know Jen said everyone starts off as a Genin, but this is for people who want extra experience for their characters. Fifteen points will be added to each stat for anyone who completes the Academy. Academy instructors will be appointed Chuunin.
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Genin:
They are the lowest level of ninja and also the ones that display the most difference in power. When they become Genin, ninja start to do their bit for their village's economy – being sent on missions that the village gets paid for. They are typically sent either on D-rank missions, which are the lowest rank and are almost entirely risk-free jobs of manual labor, or, very rarely, on C-rank missions, which are a cut above that and begin to verge on real "ninja" work – though they generally have a very low possibility of risk to the ninja involved, especially since their Jounin level sensei often accompanies them.
Genin are put in four-man cells, consisting of three Genin and a Jounin-sensei, in order to learn teamwork and experience true ninja life under the supervision and protection of an elite shinobi. The make-up of these teams is based on the individual skills of the Genin, so that there will remain a balance between the teams. For instance, Naruto Uzumaki, who passed with the lowest grades, was put in a team with Sasuke Uchiha and Sakura Haruno, who passed with the highest grades and highest written exam scores, respectively. The teams are usually made up of two boys and one girl, though there are exceptions. It appears that, usually, the four-man cells specialize in certain skills. For instance, Team Kurenai (Kiba Inuzuka, Hinata Hyuga, and Shino Aburame) is specialized in survival and tracking and Team Guy (Neji Hyuga, Rock Lee, and Tenten) is specialized in taijutsu and weapon skills. Complementary skills also seem to influence team selection, as each member of Team Asuma (Choji Akimichi, Shikamaru Nara, and Ino Yamanaka) has a specific skill that supports the other two.
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Chuunin:
Chuunin are ninja who are qualified to watch over and guide other ninja. Chuunin have reached a level of maturity that primarily consists of leadership skills and tactical prowess. Some of them, like Iruka Umino, function as teachers and others, like Shikamaru Nara, serve as team leaders in charge of small teams who need to make decisions and utilize the skills of the shinobi under their command to the maximum effect. Chuunin are typically sent on C or B-rank missions.
To become a Chunin, a Genin participates in a large examination with his or her team, known as the "Chuunin Exams". The only shown exam is a three-stage exam: the first stage tests their information gathering abilities and decision-making abilities (as well as their overall understanding of the ninja philosophy), the second stage tests their abilities at accomplishing a mission and adhering to guidelines, and the third consists of fights between those who passed the previous two stages, watched by a council which decides who becomes a Chuunin and who does not. This is not actually based on who wins, but rather, their performance during the fights; for example, Shikamaru forfeits his first match but is still promoted because of his strategic aptitude in deciding to forfeit because he knew that his Chakra was too low to continue. This way, anybody who makes it to the third stage of the Exams has a chance to become Chuunin. However, it is also possible for none of the candidates to become Chuunin if the judges believe that they do not have appropriate qualifications. Preliminaries may also be held if too many ninja teams reach the end; in the Chunin exam arc, seven teams, an unusually high number, completed the second phase of the test; the losers cannot participate in the final tournament and thus cannot be considered for promotion to Chuunin.
In the past, each village held their own Chuunin exam. After the 3rd Ninja World War, allied ninja villages agreed to hold the exams together at the selected village that would host the exam. This was done to improve relations between the villages and prevent war between them. Another advantage is that ninja that took the exam might attract clients who are interested in hiring them. Because of the growing number of ninja in each village, the exams are hosted twice every year.
Upon reaching Chuunin level, ninja can wear an identifying tactical vest that holds ninjutsu scrolls. This vest is not required; instead, some look for more elaborate clothing like capes or robes.
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Jounin:
Jounin are generally highly-experienced ninja with great individual skill who serve as military captains. They are often sent on A-rank missions, and experienced Jonin may even be sent on S-rank missions (which are considered to be the greatest difficulty). They may also carry out these missions alone. They are sometimes assigned as sensei for three-person teams of Genin. It is as of yet unknown what one has to undergo to become one, although it is mentioned in the Naruto Anime Profiles databook that Jounin are appointed, however there was also a mention of a Jounin exam in the Kurama filler arc. It is known that most Jounin are generally able to use at least two types of elemental jutsu.
These shinobi will be appointed by your Kage.
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Tokubetsu Jounin:
Tokubetsu Jounin are ninja who, rather than all-around Jounin training, have Jonin-level ability in a single area or skill, much like warrant officers of real-world militaries. They are elite specialists in their areas and are often assigned as subordinates to regular Jounin when their services are needed.
One example of a Tokubetsu Jounin would be Ibiki Morino. This character's unique ability to completely understand the workings of the human mind makes him a Jounin-level interrogation expert. Ebisu is another Tokubetsu Jonin that specializes as an elite teacher of young pre-Genin ninja.
These shinobi will also be appointed by your Kage.
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ANBU:
ANBU is actually short for Ansatsu Senjutsu Tokushu Butai. The name is a form of contraction, as in English acronyms like SWAT, where the two kanji used to abbreviate the group's full name constitute an actual word on their own. The ANBU wear porcelain animal masks in order to distinguish themselves from normal shinobi and to conceal their identities. They also have standard uniforms consisting of black and gray armor, arm guards, and a signature spiral tattoo on their arms. Certain ANBU wear black cowls over their standard uniforms, and squad leaders may wear white cowls.
ANBU protect the village from exceptional threats, conduct high-risk missions into enemy countries, and deal with extremely strong ninja. They are also responsible for carrying out assassinations and missions requiring specially trained ninja. Unique for most characters in Naruto, all ANBU carry Ninjaken, which are usually strapped to their backs, and they all know the layout of the human body in detail. By using Temporary Paralysis Technique, ANBU members can paralyze an opponent, leaving them open for attack. With Time Reversal Technique, an ANBU can put someone in a state of reverse hypnosis, allowing them to remember details that they otherwise would not.
ANBU is an organization that serves under the direct command of their Kage. Kakashi Hatake was a former captain and Itachi Uchiha became an ANBU captain at age 13. Ibiki Morino, the proctor of the first Chunin exam, is the head of the Konoha ANBU Torture and Interrogation Squad. Zabuza Momochi and Raiga Kurosuki were once part of Kirigakure's ANBU.
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Hunter-nin:
Hunter-nin are a special team within each Hidden Village given the specific duty of hunting down missing-nin. They kill their target, taking the head as proof, and then completely dispose of the body by using various methods, such as cremation or the summoning of wild carrion crows to devour the corpse. This is done in order to make sure the village secrets which a ninja's body holds -- such as chakra types, herbs eaten, ninjutsu, special medicine, and kekkei genkai -- will not be revealed to outsiders. Hunter-nin are also supposed to destroy the corpse at the very spot the body is lying; it is not to be moved after it is dead. Hunter-nin are also taught about how the human body works and how to kill people easily. Early in the series, Haku poses as a hunter-nin as a ruse to rescue the supposedly killed Zabuza Momochi. Real hunter-nin have only been alluded to, and so far have not been seen in the world of Naruto, though it is possible they actually exist as part of the ranks of ANBU; canon is unclear on the differences between the two groups. They are at least ANBU-trained, as mentioned by Kakashi during his short explanation of the group.
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Kage:
Those who have achieved the title of Kage are the leaders of the five most powerful Hidden Villages and the most powerful ninja in their respective villages. There may be exceptions, however; for example, a ninja may be the most powerful at the time of being installed as Kage, but as he or she ages, more youthful ninja may become more powerful.
A Kage may retire and give the title to someone else; the title, once granted, is held permanently. This creates a case where there are two Kage at the same time, with only one of them actually active -- as was with the Fourth Hokage and the Third Hokage, where the latter had given up the title to the former, only to come out of retirement when the former died.
Their elite status is also attributed to the tendency for most Kage to have family members who were previous Kage, or be personally taught by a former Kage or student of a former Kage. Examples of this occurrence include Gaara, who succeeded his father as Kazekage; the Fourth Hokage, who was taught by the Third Hokage's student Jiraiya; Tsunade, granddaughter of the First Hokage, grandniece of the Second Hokage, and former student of the Third Hokage; and the Third Hokage who was taught by both the First Hokage and Second Hokage.
The five Kage have different titles depending on their village. Those titles are:
Hokage 火影 Kage of Konohagakure.
Kazekage 風影 Kage of Sunagakure.
Mizukage 水影 Kage of Kirigakure.
Raikage 雷影 Kage of Kumogakure.
Tsuchikage 土影 Kage of Iwagakure.
The Kage stand equally with the rulers of their countries, oversee the activities of their villages, and are the leaders of ninja society.
Orochimaru, founder and leader of Otogakure, is also referred to as Otokage 音影 Sound Shadow by some fans. This is not an official title, as Otogakure is not recognized by the five great Hidden Villages as an equal nor is Orochimaru actually a Kage, though his abilities are on par with one, as he gains the upper hand in the battle with the Third Hokage.
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