Kabaya produced this insane toy as a promotional item for their Jyu-C candy (pronounced like "juicy") in 1973. It appears that Jyu-C is still being produced today (http://www.kabaya.co.jp/juuc/item.html). I guess it must be good; can't say I've ever seen or tried it.
This toy consists of four parts. The first is a large plastic egg (not shown) with the Kabaya Jyu-C logo. This egg splits in half to reveal a vinyl monster inside. I'm told that the name of this character is "Henshoku Kaiju Biomelon" (Color-change Kaiju Biomelon). Biomelon? Yeah, I dunno.
The larger figure is inside the egg. I'm pretty sure it's made of vinyl; all four limbs are articulated. The figure is actually just a hollow shell held together by magnets and metal washers, and splits apart to reveal...
A smaller vinyl figure! You might recognize this fella from some of those little patchi-kaiju sets that were reproduced/bootlegged several times over. The vinyl is very soft and rubbery.
Now this guy actually arrived with the head popped into the neck joint. When I took it out, I heard something rattling around inside the small toy. My first thought was, "Oh God, it's another creepy note." With some trepidation, I heated the toy a bit and popped the head off (although the vinyl is so soft that you really don't need to heat it at all).
AND THERE IS A MICRO VINYL INSIDE THE SMALL FIGURE. This one must be barely an inch tall. There is an amazing amount of sculpted texture for something that could be easily snorted up a kid's nostril.
I can't fathom the thought process and chain of corporate approvals that would give rise to such a bizarre and elaborate prize item. But I can say that pulling out that micro vinyl from the body cavity of another vinyl fills me with the type of wonder and delight that makes this hobby worthwhile.
Great find - what a fantastic toy!