It was a shocking find: crudely made DVDs with images of grown men having sex with children as young as 12. Until this year, the men who bought those images faced little more than a slap on the wrist. But police in Kyoto, Japan's ancient capital, decided for the first time during the summer to pursue criminal charges against three male customers in a country widely seen as much too lenient on child pornography.

The police campaign is largely the work of Kyoto's prefectural Governor, Keiji Yamada. During his fight for office two years ago, Mr Yamada pledged to roll out an ordinance banning the buying and possession of child porn – still legal under Japanese law, unless there is proven intent to sell or distribute. Even if the makers are arrested, the images circulate for years on the internet and in secondary markets.

Child porn-related crimes have grown fivefold in Japan through the last decade, according to the country's National Police Agency. At least 600 children a year fall victim to paedophile directors and photographers. "The internet is probably the biggest factor," said Akira Koga, spokesman for the Kyoto Police. "It's very difficult to monitor and control." A new police cyber patrol uncovered the trail back to the three men from the DVD producer in Tokyo.

Japan has long been considered a hub for the production and possession of paedophile images. It is the only OECD (Organisation of Economic Co-operation and Development) nation that has not banned possession of child porn, partly to protect its manga and anime industries, which churn out thousands of titles every year that sail close to the legal wind. A government survey in 2002 found that 10 per cent of Japanese men admitted to owning child porn at some stage.

Bookstores and convenience stores across the country stock magazines carrying semi-naked pictures of pubescent and pre-pubescent children. Many underage girls have built careers as so-called "junior idols", posing in suggestive poses. In the electronics district of Akihabara, Tokyo's capital of geeky cool, tourists gawk at cartoon images of children in various stages of sexual distress, all perfectly legal. One of the nation's most popular pop groups, AKB48, features a revolving cast of members, some as young as 13, persuaded to pout in adult lingerie for videos and magazine covers.

The UK-based Internet Watch Foundation traced nearly 16,250 websites depicting child abuse back to Japan in 2006, enough to put it third on a global watch list. In 2009, the Canadian Centre for Child Protection placed Japan fourth among the top five countries hosting websites with child abuse images, according to ECPAT International, an NGO that fights to end the commercial exploitation of children.

Campaigners engaged in a cat-mouse-game with paedophiles across the world say a new approach is long overdue. "The US is very frustrated with Japan," says Jake Adelstein, a journalist and board member with the Polaris Project Japan, a non-profit organisation that combats human trafficking and sexual exploitation. "The FBI and Homeland Security Investigations give Japan's police hundreds of tips on child pornography makers and distributors every year and none of them are acted upon."

Police complain that they do not have the legal resources to fight the problem. Japan only banned the production and distribution of child porn in 1999, mandating punishment of up to five years in prison. Kyoto today is still the only one of Japan's 47 prefectures that threatens prison for possessing child porn. Since Governor Yamada's ordinance, possession carries a maximum one-year jail term or a fine of up to 500,000 yen (£4000).

One reason for the reluctance to roll out new national legislation is the fear that police may use it too liberally, threatening freedom of creative expression. Conservative politicians have long demanded a clampdown on pornographic images. Two years ago, Tokyo's metropolitan assembly banned the sale or rent of comics and anime movies depicting younger characters engaging in "extreme" sexual acts, including rape.

But the ban was resisted by Japan's biggest publishers, who produce hundreds of risqué manga a year featuring fetishism, incest and "Lolita porn", along with more mainstream fare. The Tokyo Bar Association also criticised the wording of the legislation, warning that it could be the thin edge of the censorship wedge against sexualised images of any kind. The association and many legislators want the police to continue targeting producers and distributors of child porn, not consumers.

Opinion polls suggest that most Japanese voters want stricter laws. But with parliament essentially gridlocked ahead of a general election, widely expected this autumn, there is little appetite for a messy political fight over what is seen as a relatively minor issue. The ruling Democratic Party (DPJ) has shelved a 2008 draft law that would have banned any involvement in child pornography. Their conservative opponents, the Liberal Democrats, have promised a tougher line.

Until then, say campaigners, paedophiles will continue to have the upper hand. "Child pornography prosecutions almost always involve images contained on computer hard drives or start with an internet protocol (IP) address that is known to have accessed child pornography material," said a spokesperson for ECPAT International. "The fact that Japanese courts cannot grant search warrants based on IP address information hampers the fight against child pornography."

The organisation warns that Japanese police cannot coordinate with international sting operations because domestic law is out of sync with most of the developed world.