Luxury brands including Louis Vuitton, Chanel, Cartier, Gucci, Prada, Bulgari and Rolex are losing as much as an estimated $4.3 billion a year in Japan to the sale on internet of designer counterfeits.

Laurent Dubois, chairman of the Japanese branch of the Union des Fabricant, a global organisation which was set up to combat counterfeiting, said that over half of all luxury branded products sold over the internet in Japan is fake. He told the FT that this is the worst case of counterfeiting in Asia.

In 2002 the Japanese government promised to make the country a "nation of intellectual property", but the astronomical losses suffered by the luxury goods companies is raising doubts about the country's commitment to the pledge, and manufacturers are demanding new rules to fight fakes.

It is legal to import fake goods into Japan as long as they are for "personal use". This leniency has resulted in "mules" transporting the counterfeit goods from China and South Korea into Japan claiming they are for personal use.

Another problem is that Japanese authorities are unable to regulate the sale of goods online. Internet service providers are not legally obligated to remove products placed on auction sites by suspected sellers of fake goods. According to Dubois, the online sale of counterfeit goods are made easier by the legality of parallel imports - goods imported without authorisation from the owner of the copyrights or trademarks - in the country. Furthermore, the fines for these purveyors of fakes are not high enough to prevent them from doing so.

Dubois told the FT that the Union des Fabricants is in talks with the Ministry of Justice and the Ministry of the Economy, Trade and Industry about the problem and believes that a solution will be approved this year. The Ministry of the Economy, Trade and Industry is also contemplating new legislation that would prohibit the import of counterfeit goods for personal use.