TOKYO (Reuters) -Japan's Mitsubishi Motors, a junior partner of Nissan Motor, is considering not joining a planned business merger between Nissan and Honda Motor, sources told Reuters on Friday.

Mitsubishi Motors plans to remain listed while continuing its cooperative relationship with both companies, three sources said on condition of anonymity because they were not authorised to speak about the matter publicly.

Shares of Mitsubishi Motors slumped more than 6% in early trade on Friday and those of Nissan were down 1.6%.

The development comes after Nissan and Honda last year said they would begin formal talks on the merger that could potentially create the world's third-largest auto group with annual output of 7.4 million vehicles.

Mitsubishi Motors, in which Nissan is the top shareholder with a 24% stake, was expected to decide by this month whether it plans to take part.

In a statement, Mitsubishi Motors said there had been media reports on the way it intends to participate in the business integration framework that Honda and Nissan are considering, but that the reports were not announced by the company.

It added it was considering various possibilities at this stage, and its direction had not yet been decided.

The Yomiuri newspaper reported earlier on Friday that Mitsubishi Motors was considering not joining the planned tie-up on concerns that it would be difficult for Mitsubishi to affect management decisions of the joint holding company given its relatively small size.

When asked about Yomiuri's report, a Nissan spokesperson referred to Mitsubishi Motors' statement, without commenting further. Honda did not immediately respond to a request for comment.

Nissan and Honda said in December they aim to complete their talks around June 2025 before setting up a holding company by August 2026, when shares of both companies would be delisted.

Mitsubishi Motors will maintain its current structure for now and focus on expanding its share in the Southeast Asia market, the Yomiuri added.