Yahoo Inc (YHOO.O) is in advanced talks to exit its joint venture in Japan with SoftBank Corp (9984.T), a move that could lead it to focus on reaching a decision on its China assets.

A deal to transfer Yahoo's 35 percent stake in Yahoo Japan (4689.T) to telecommunications company and investor SoftBank could come within a few weeks, people with knowledge of the discussions said. The public value of the stake is just under $7.5 billion.

A deal has not yet been reached and could yet fall apart, these people said.

If and when a deal is reached, Yahoo is likely to turn its attention to the China market, where it owns an estimated 40 percent stake in one of China's most prominent Internet companies Alibaba Group, the parent company of listed Alibaba.com, these people said.

There have been no recent negotiations between the two companies after an Alibaba spokesman said last September it had moved on from buying back Yahoo's stake.

The intermingled ownership of Alibaba, and Yahoo Japan complicates the discussions. SoftBank also owns a stake in Alibaba.

There is a triangular relationship between the three parties ... Anything that happens with Alibaba has to involve all three parties, one of the sources said.

The talks come as Yahoo Chief Executive Carol Bartz is under pressure to turn around the once mighty Internet company that has fallen behind in prominence and growth to Google and Facebook. A much hoped-for turnaround in Yahoo's internet advertising business following a splashy search advertising tie-up with Microsoft Corp has yet to materialize.

A sale of Yahoo's stake in the mature Japanese market would bring a cash infusion that could be viewed favorably by investors, analysts have said.

Leaving the fast-growing and massive China market would be more controversial. Western Internet companies have largely failed to crack the tough regulatory regime and home-grown rivals such as Baidu Inc (BIDU.O).

The ongoing negotiation between SoftBank and Yahoo have turned up a number of potential deal structures, these people said.

To avoid paying a 38 percent tax bill, Yahoo is against a straight sale of the stake, whose market valuation is just under $7.5 billion.

Tax-free options being discussed include an asset swap, where SoftBank would acquire a stake in Yahoo, with which it would swap for Yahoo's Yahoo Japan stake. Another option is for Yahoo to set up a tracking stock giving its shareholders the ability to sell off the stock.

A plan to set up a tracking stock, which does not require the approval of SoftBank founder Masayoshi Son, is seen as negotiating leverage for Yahoo.

A tracking stock would likely depress the valuation of Yahoo Japan shares, one source said, as it would dilute the value of the existing shareholders.

must be using the threat of a tracking stock to threaten a stock swap deal, which would be much more preferable for Yahoo, said the source.

Yahoo executives have publicly discussed the likelihood of its exit from Japan over the past few weeks. The two sides are seeking tax efficient options and working with our partners so it works out well, Yahoo Chief Financial Officer Tim Morse said at a recent investors conference.

UBS is advising Yahoo. Boutique investment bank Raine Group, founded by two Wall Street bankers, Joseph Ravitch, a former partner at Goldman Sachs, and Jeffrey A. Sine, a former senior banker at UBS. SoftBank is an investor in the Raine Group.

Resolving the future of Yahoo's stake in Yahoo Japan would be a tidy resolution to a long term partnership with SoftBank established with Yahoo co-founder Jerry Yang in 1996.

Son, an outspoken technology entrepreneur, has openly attacked Yahoo's track record as an innovator and its approach to international markets.

The relationship between SoftBank's Son and the straight talking Yahoo Chief Executive Carol Bartz frayed after Yahoo Japan replaced its search advertising partner with Google last year.

In the United States, Yahoo's 10-year partnership with Microsoft that began in 2010 for Internet search advertising has yet to pay off.

Yahoo, SoftBank, Alibaba and UBS declined to comment. Raine Group's founders were not immediately available for comment.