The HP reduction is considered 30% by the manufacturers. Yamaha has absolutely nothing to say about the legality of it, they may have an opinion, but it really means nothing. Many boats that are designed for the option of a jet will have both a prop and jet rating, along with a tiller or remote rating.
It mainly depends on where you live and boat, there is no federal law on HP ratings, only recommendations, although many people seem to believe the CG will ticket someone for being over the recommended HP limit, they can't. There are local regulations that may limit the HP though, so check that aspect of it. Insurance companies rarely consider it a problem, I actually asked a few, they just ask what the HP is and give you a quote.
If you get a little more specific with your question it may be possible to get an accurate answer, make model and size of boat, state you live in, etc.