Three North Asian countries are closer to signing a deal to codevelop an open-source operating system to replace Microsoft Windows, according to a Japanese news report.

The deal is expected to bring together China, Japan and Korea in efforts to develop the software. Representatives from both private and government agencies will meet later this year to discuss the collaboration's terms, according to the report.

The move to jointly develop a server operating system that's based on Linux began in March with a meeting in Thailand of more than 100 software engineers from the three countries.

All three countries already have thriving Linux software developer communities--especially for embedded Linux, the operating system used in devices such as television set-top boxes and industrial machines.

A plan by Japan, China and South Korea to develop an operating system alternative to Microsoft's Windows software could raise concerns over fair competition, Microsoft said Friday.

Japan, the world's second-largest economy, made a proposal at an Asian economic summit this week to build an inexpensive and trustworthy open-source operating system that would be based on a system such as Linux, which can be copied and modified freely.

"We'd like to see the market decide who the winners are in the software industry," said Tom Robertson, Microsoft's Tokyo-based director for government affairs in Asia.