Yahoo Japan is likely to partner with Google, instead of Microsoft's Bing, for a search alliance in the country, AllthingsDigital reported on Monday.
The Japanese search company is not wholly owned by Yahoo, which has only a 35 per cent stake, with media and telecom group SoftBank holding around 40 per cent.
Google, and Yahoo Japan - which currently uses the US-based parent's search technology - would together dominate the country's search market if the deal goes through.
Yahoo Japan has more than a 56 per cent share of the Japanese search market, while Google has 31 per cent and Microsoft has about 3 per cent.
Although Yahoo and Microsoft agreed on a search and online advertising partnership last year, Yahoo Japan was free to choose any search service.
It is thus not obliged to use Microsoft's Bing technology, which will be powering Yahoo in the US and other countries where Yahoo operates.
Microsoft is likely to try to block the deal, say Japanese media.