a have a novice question, I want to make this kanji vector as a cut out on the vector it is on top of, meaning I don't want to simply make it white I want it to be a "cut" so I can see the background behind it. Thanks!
If the kanji is a shape (closed path) you can expand it, select it and the yellow background and use Pathfinder>Minus Front.
This will leave you with the yellow background with the kanji shape punched out of it.
I suspect before you can do a clean pathfinder transformation you are going to need to trace and clean the kanji and start with a new colored background (just a rectangle).