Feb. 26 (Bloomberg) -- Microsoft Corp., the world's largest software maker, had its Tokyo office raided by Japan's Fair Trade Commission as part of a probe into how it supplies Windows XP software for computers sold in Japan.

The investigation involves whether Microsoft's licensing of Windows XP software violated the country's anti-monopoly law, said a commission official, who declined to be named. Microsoft Japan spokesman Kazushi Okabe confirmed commission officials were at the office, adding that he didn't know why they were there.

Japan is the world's third-largest market for PCs and sales for makers such as NEC Corp. and Dell Inc. will probably rise 6.5 percent to 13.7 million units this year, according to researcher IDC Japan. Redmond, Washington-based Microsoft's effort to resolve an antitrust lawsuit regarding Windows XP in Europe is stalled because of a dispute over music and video players.

The Tokyo raid ``affects Microsoft's image but it's not a crucial issue,'' Iwafuchi said. ``Even if Microsoft was ordered to suspend operations in Japan temporarily, the damage would be limited.''

Windows XP, available in Japan since November 2001, is an operating system that is often preloaded by computer makers before sale. Such software is necessary for other programs, such as Internet browsers or word processors to work on a computer.

Microsoft shares fell 0.7 percent to $26.70 in New York Stock Exchange composite trading yesterday. The shares rose 5.9 percent last year, compared with a 26 percent increase in the S&P 500 Index, which represents a range of U.S. stocks.

The company is under investigation by the European Commission, the Brussels-based regulatory arm of the European Union, which accused Microsoft of illegally using Windows to control markets in operating systems for larger computers and for audio-visual software.

Microsoft faces millions of euros in fines as early as next month and the cost of court battles unless it comes to an agreement with EU officials on remedies.

To contact the reporter on this story: Hiroshi Suzuki in Tokyo at Hsuzuki5@bloomberg.net

Last Updated: February 25, 2004 23:51 EST