She's giving us step-by-step instructions. She says:
"Using the left hand, grasp the shirt at the middle, 1/4 of the way in from the far edge. With the right hand, grasp the shirt at the shoulder parallel to where the left hand is. Take the right hand (holding the shoulder) over to the hem at a point parallel to the left hand. Now, holding both the shoulder and the hem in the right hand, uncross your arms and shake the t-shirt to smooth it out. Then, lay it down so that when you fold it over, the sleeve is underneath. That's it, now your shirt is nice and tidy."
Okay, well, it's not an exact translation because some Japanese words don't translate exactly, but it's fairly close and I'm sure that you get the idea.
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Here's the key. When the little asian girl is pinching the clothes... she's pinching both layers... the front and and the back..
And after you cross your arms just lift your arms up and uncross your arms... just dont let go of the pinch and shake it out until it one sleeve is hanging down.
( Then it turned easy!)
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Also How to make A NinjaMask out of a shirt