By Leika Kihara

TOKYO (Reuters) - Japanese authorities have set up a working group to discuss the impact Facebook's proposed Libra digital coin could have on monetary policy and financial regulation, government sources said, ahead of a G7 finance leaders' gathering where the topic will be high on the agenda.

The working group, consisting of the Bank of Japan, the Ministry of Finance and the Financial Services Agency, began meeting this week and will seek to coordinate policies to address the impact Libra could have on regulation, monetary policy, tax and payments settlement, the sources said.

The plan by the social media giant to build a digital currency has raised concerns among global regulators that it could quickly become systemic given Facebook's huge cross-border reach.

France is using its presidency of the Group of 7 group of economic powers to launch a task force to look at how central banks can ensure digital currencies like Libra are regulated from money-laundering to consumer-protection rules.

European Central Bank policymaker Benoit Coeure is due to deliver a preliminary report on the matter next week at a meeting of G7 finance ministers in Chantilly, north of Paris.

Japan hopes to rally support from other countries to expand the task force into a bigger group of tax and financial regulators, given the wide range of policies that could be affected by digital currencies, the officials said.

In Japan, the central bank does not oversee banking regulation, which is handled by the Financial Services Agency.

As this year's chair of the bigger G20 group of major economies, Japan will also look at ways to align efforts made separately by the G7 and G20 to address the policy implications of Libra, the officials said.

At a summit last month in Japan held after Facebook's announcement of the Libra plan, the G20 leaders said they were closely monitoring developments and "vigilant to existing and emerging risks" involving crypto-assets.

They also urged regulators including the Financial Stability Board (FSB) to advise the G20 on multilateral responses to the growing presence of crypto-assets.

(Reporting by Leika Kihara; Editing by Daniel Wallis)