Microsoft is to launch a legal challenge to Yahoo Japan’s decision to partner with Google, arguing that it will create an “even more anticompetitive” situation for search engine marketing in the region.

Business Insider reported that Microsoft SVP Brad Smith had criticised Yahoo Japan’s decision to power its PPC search advertising and organic results with Google technology within hours of its announcement. “The 2008 deal would have locked up 90% of paid search advertising,” said Smith. “This deal gives Google virtually 100% of all searches in Japan, both paid and unpaid. It means there will be no search competition in Japan.”

Combined, Yahoo Japan (47%) and Google (51%) will account for 98% of all paid search engine marketing revenue in Japan. The Japanese branch of Yahoo is free to pursue an alternative to the Bing/Yahoo deal – approved in the US due to the significantly lower market share of both companies in that region – because Yahoo multinational only owns a 35% share in the company.

In a follow up to Smith’s statements, a Microsoft rep told Business Insider that the company would be presenting evidence to the Japanese FTC to challenge the deal. The rep said the evidence would explain why “this deal is substantially more harmful than Google’s deal with Yahoo in 2008 that the DoJ found to be illegal.”

However, the Japanese authorities have already said that they see no problems with the arrangement.

Speaking at a press conference, the executive secretary of the country’s FTC, Takahide Matsuyama, said that it wasn’t an anti-trust concern because though AdWords will power Yahoo search ads, the revenue won’t be shared between the two companies and they will remain competitors.

“In the U.S, the concern was that the companies would go from advertising competitors to collaborators,” said Matsuyama. “If they continue to compete for advertisers, the issue of changing your search engine is not an anti-trust problem.”