Rumors of a PlayStation mobile phone have resurfaced, with reports in Japan suggesting that the long rumored phone may finally be getting a green light.

Japanese business newspaper Nikkei reported that Sony “plans to set up a project team as early as July to develop a new product that combines functions of its portable game player and Sony Ericsson’s mobile phones.”

The paper claimed that the development of the phone is in direct response to the growing popularity of the iPhone and iPod Touch as a gaming platform, including growing support from leading game designers such as Capcom Co Ltd and Square Enix Holdings. Sony currently produces the PlayStation Portable (PSP).

(via Reuters)