The transport ministry believes Uber's free taxi-like service in southern Japan, which matches passengers via a smartphone app with private drivers, may violate Japan's Road Transportation Law, Kyodo said, citing unnamed ministry officials.
The U.S. company did not immediately respond to a message requesting comment on the report.
Uber's pilot project, conducted jointly with an affiliate of Kyushu University, began on Feb. 5 in Fukuoka with the aim of collecting data on traffic demand, Kyodo said.
Uber says it operates in 55 countries, with its other Japan service in Tokyo. The company has seen rapid growth as well as controversy.
Last week Uber announced a free service in Seoul, its second bid in a month to operate legally in South Korea after the authorities indicted chief executive Travis Kalanick for the company's alleged transport violations.
In recent weeks, Uber has suspended its service in Boise, Idaho, in the United States, filed a complaint in Europe over what it calls unfair treatment in France and suffered a U.S. security breach that disclosed details on 50,000 drivers.
© Thomson Reuters 2015