Japan is to bow to international pressure and ban the possession of child pornography, although the new law is expected to anger child welfare groups by exempting manga comics and animated films.

Media reports said the Liberal Democratic party and its junior coalition partner are drafting legislation that would bring Japan into line with most other developed countries, amid mounting criticism of its failure to address the sexual exploitation of minors.

Currently, Japan and Russia are the only G8 countries in which it is still legal to own pornographic images of children provided they do not intend to sell them or post them on the internet.

Japan is one of the world's biggest suppliers of child pornography and the second biggest consumer after the US, despite a 1999 law that banned the production, sale and distribution of images of children under 18.

The government decided to act following scathing public criticism by the US ambassador to Tokyo, Thomas Schieffer. "The term 'child pornography' misrepresents the heinous nature of this crime," Schieffer wrote in a recent newspaper article.

"Unlike some people in adult pornography, children are not willing or paid participants. The majority of images and videos depict the violent and brutal sexual assault of children, most of them younger than 12 years old. We are talking about child rape."

This week Schieffer will discuss the measures with the justice minister, Kunio Hatoyama.

"This is a reprehensible market," Hatoyama said. "It is true that the lack of a penalty for individual possession is serving as a loophole. As with narcotics, approval of possession could lead to distribution over the internet."

Though they welcomed the new law, child welfare campaigners said they were dismayed that the legislation will almost certainly not apply to the huge market in manga and other forms of animation that sexually exploit children.

"We would like the revised law to cover manga, but it is extremely difficult," a spokeswoman for Unicef's Japan office told the Guardian.

"We keep encountering arguments about freedom of expression, but if the US and other countries can ban that kind of material, why does Japan continue to tolerate it?"

Saito said it was impossible to gauge the size of Japan's child pornography market because it includes illegal websites and DVDs featuring children who, in some cases, are much younger than 18.

Figures show an alarming increase in demand for child pornography in Japan. Last year, 304 children under 18 were identified as victims, police said, up more than 20% from 2006 and the highest total since records began in 1999.

While police prosecuted 25 child pornography cases in 1999, the figure had risen to 585 cases by 2006.

Criminalising possession has widespread public support amid a slew of media reports about men offering money to girls in return for sexually explicit photographs via mobile phone dating sites.

A survey last year found that about 70% of adults were in favour of banning possession, while almost 86% said manga and other illustrations should also be covered by the revised law.

Sexually explicit comics account for a sizeable chunk of Japan's 500bn yen manga market. Many feature schoolgirls or childlike adults being raped or engaging in sadomasochism.

Manga belonging to the popular "lolicon" - Japanese slang for Lolita complex - genre are likely to escape the ban, as MPs are concerned that outlawing them could infringe on freedom of expression and drive men who use them as an outlet for their sexual urges to commit more serious offences.

Other critics of a far-reaching ban say the characters depicted in scores of lolicon titles are fictional and so are not being harmed.

Police are responding to public concern over books carrying suggestive photographs of girls under 15 that are commonly sold alongside hardcore pornography.

Among last year's most popular "junior idol" titles was Melty Pudding, featuring 9-year-old Rei Asamizu dressed in a bikini.

But in a rare move, police earlier this year arrested the publisher of a book that contained photographs of a scantily dressed 14-year-old girl striking suggestive poses.

· This article was amended on Tuesday March 11 2008.