* Japan to propose expanding Chiang Mai Initiative -Nikkei
* South Korea wants to double size of Chiang Mai to $240 bln
* An expansion could lead to diminished role for IMF (Adds details)
By Kaori Kaneko
TOKYO, Feb 17 (Reuters) - Japan will seek support for the expansion of a currency swap network to prevent financial crises in Asia at the Group of 20 finance minsters meeting this week, a newspaper reported, echoing similar calls from South Korea.
Should Asian countries embark on such a move, it would be another sign that policymakers are slowly redesigning the institutions that monitor the global financial system with a potentially diminished role for the International Monetary Fund.
Japan will propose that the Chiang Mai Initiative, under which East Asian nations can swap currencies if the region falls into credit turmoil, be enlarged in monetary terms and may also ask more countries in the region to join, the Nikkei business daily said.
South Korea's finance minister last week called for a doubling in size of the network to $240 billion.
Japan hopes to reach an agreement with neighbouring countries in the next two to three years, the Nikkei said.
Officials at Japan's finance ministry were not immediately available to comment.
Asian countries have floated the idea of expanding their currency swap framework before, but the idea has usually met U.S. opposition due to concerns about the IMF's role.
In Europe too, new moves are afoot.
European finance ministers agreed on Monday to a permanent rescue mechanism to address its year-long sovereign debt crisis that will accept money from the IMF but the mechanism could eventually eclipse the IMF's presence in Europe.
Finance chiefs and central bankers from G20 countries will gather in Paris on Feb. 18-19 to discuss how to deal with global economic imbalances, reform of the international monetary system and financial regulation.
The Japanese government has drawn some inspiration from a lending facility for emerging economies that the IMF set up in 2008 at the height of the U.S. mortgage derivatives crisis, the Nikkei said.
Finance Minister Yoshihiko Noda will present the idea at the meeting, the Nikkei said. Noda said this week that Japan wants to actively convey its views on regional financial cooperation, including the IMF's role, at the G20 finance chiefs' meeting.
The government wants to start talks on the issue in May when finance ministers from the Association of Southeast Asian Nations (ASEAN), Japan, China and South Korea meet, according to the Nikkei.
The Chiang Mai Initiative was set up in May 2000 after a meeting of Asian finance ministers in the Thai city of Chiang Mai to try to prevent a repeat of the 1997/98 Asian financial crisis and encompasses the Association of Southeast Asian Nations plus China, Japan, and South Korea. (Editing by Edwina Gibbs)