He is bound by the rules of the country he lives in. Underage Porn wasn't banned till 2014
Japan to Ban Child Pornography
Like I said in terms of possession he may of owned stuff from before they were made illegal.
Actually child porn was
banned in Japan in 1999, which is quite shocking as most countries had banned it by the 1970's. Bizarrely
possession of child pornography wasn't banned in Japan until 2014 (which is the law you're referring to), however the law wasn't enacted until the following year apparently so people in possession of material could get rid of it. That just astounds me.
The police caught him with DVDs, so I think it's hard to believe Watsuki bought the material legally. I kind of doubt such a niche product like that was being produced on that format in the late 1990's.
Stuff like Junior Idol material is still sold in some shops in Japan. It's a broad genre which covers prepubescent music groups, but also photobooks and child model DVDs, who pose in the same way a gravure idol would. Essentially it's a way to sell quasi child porn and get past the censors. Despite the hyperbole you may read elsewhere, this material is kind of niche. The only place I saw it was in a used bookstore in Jinbocho in Tokyo.
But going back to the case, I think this is a real kick in the guts for a lot of western fans as a fair few of them came to love anime through the Rurouni Kenshin TV series back in the late 1990's.