US Edition FXOnline Japan was bought less than three years ago in an all-cash deal worth £118m, funded partially by money raised from investors.
However, IG was forced to slash the value of the investment after it was "severely impacted" by a change in Japanese regulation, which cut the size of bets clients were allowed to make by half, causing revenue to slump.
Tim Howkins, chief executive, said: "That's a business where we've had quite considerable difficulties, really driven by a very unfriendly regulator who imposed restrictions which had a pretty severe impact on revenue."
He added: "I think generally investors disregard the impairment because it's not cash, it doesn't affect the ability to pay dividends."
Revenue across the group increased by 7.3pc to £320.4m and the company was keen to highlight a 3.4pc increase in adjusted profits to £163m once the £143m costs for Japan and other charges relating to the closure of its sports division, extrabet, were removed.
The sports division was closed at a cost of £7.75m.
Revenue growth throughout the year was driven by a 21pc increase in Europe, with Germany delivering 54pc growth in the period, European business now contributes 18pc to the group total
The overall number of people making bets with the group grew by 11pc, but in a sign of the difficult conditions, the average amount wagered by each customer fell.
New client accounts fell by 5pc, or 3,126, when compared with last year but the ability to retain clients from the prior year improved by 6pc to 70pc.
Robin Savage, analyst at Collins Stewart, said: "It's a great business with lots of cash generation and it does look cheap, its just not growing in quite the way we would like it to."
The company recommended a final dividend of 14.75p per share, bringing the total to 20p, an 8pc increase on last year.
The shares closed up 5.3pc at 433p.