Japan’s monopolies regulator is poised to launch a full anti-trust investigation into Rio Tinto’s proposed iron ore joint venture with BHP Billiton, saying that the deal may raise “serious concerns over anti-competitive issues.”

Kazuhiko Takeshima, the chairman of Japan’s Fair Trade Commission (JFTC), told The Times that the watchdog was now awaiting further details of the joint venture and that it would expect to work closely with EU counterpart on a legal review of the deal if the situation called for one.

The venture was announced last week after Rio Tinto axed a $19.5 billion (£12 billion) deal with Chinalco, the state-owned metal giant, risking the ire of China, its biggest customer. The move followed pressure from investors, and Rio now plans to raise $15.2 billion through a rights issue. Xiong Weiping, the president of Chinalco, said the group was "very disappointed" with the outcome.

Mr Takeshima’s comments pre-empted a statement by the Japan Iron and Steel Federation later in the day, in which the influential trade organisation effectively called on the JFTC for an immediate review of Rio and BHP’s plan.

The federation, a key opponent of BHP's abortive £70 billion hostile bid for Rio last year, said it opposed the iron ore joint venture announced last week by the two companies because it could restrict competition.

Rio and BHP are proposing a merger of their iron ore operations in the Pilbara region of Western Australia. The venture is to manage mines and infrastructure, but the two companies will continue to sell their product independently. Sources at two of Japan’s largest steelmakers expressed “serious doubts” over how independently Rio and BHP’s sales offices in Japan would operate in reality.

Rio and BHP have estimated that the venture would generate cost savings of at least $10 billion. As part of the iron ore agreement, BHP will pay Rio $5.8 billion to make the joint venture a 50-50 partnership and there is a $275 million break fee.

However, the deal is subject to regulatory approval by the European Commission and governments and the companies said last week that they expected the approval process to take up to a year.

The tie-up has already provoked an outcry from both European and Chinese steelmakers, who claim the deal would create an effective monopoly.

Eurofer, the European steel group, said that currently three companies controlled almost 75 per cent of the world's seaborne iron ore, adding: "Now we are heading towards two. This is not a healthy condition for trade and competition."

BHP dropped its hostile bid for Rio last year in part because the Commission raised concerns about one company controlling the vast Pilbarra iron ore operations. The combined group would have owned 39 per cent of the world’s exported iron ore, the raw material used to make steel.

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