Under Japan's current legislation, only the production and distribution of child pornography are banned, a situation that campaigners say is damaging to children.
On Wednesday the lower-house Committee on Judicial Affairs was discussing a bill to expand the scope of the legislation, a parliamentary official said.
Jiji Press news agency said the committee was expected to decide during the day to submit the bill to the main chamber.
The legislation will likely be quickly passed and sent to the upper house before the current parliament session ends on June 22, the agency said.
A revised law would ban possession of photographs and videos depicting real children, but would exclude comics and "anime" video, following calls to protect freedom of expression, Jiji said.
Anyone found guilty of possessing the material could face imprisonment of up to one year, or fines of up to Y1 million ($A10,555), it said.
In order to encourage disposal of material, the penalties would be delayed for one year after the revised law comes info force, Jiji said.
Campaigners against child porn have long urged Japan to outlaw the possession of sexually explicit images of children.
Japan is the only member of the G7 group of industrialised nations where the possession of child porn remains legal, while it is banned and subject to penalties in more than 70 countries.
It is seen as a major global source of child pornography in photo and video form.
Images that can be legally possessed in Japan show real children being abused, raped and molested, campaigners have said.
Police data have shown the number of victims hit a new record of 646 in 2013 only for those minors identified.
This number, however, is believed to be just the tip of the iceberg.
The country's porn industry is huge and visitors note the ubiquity of sexual imagery, particularly the prevalence of pictures showing young-looking girls in school uniforms.
While it is unusual to see people openly reading paedophilic manga in public, mainstream comics read by commuters sometimes contain sexualised images that many Westerners find unpalatable.
