* U.S. regulators ordered nationwide recall last week
* Takata faces Tuesday deadline for complying
* No decision yet on expanded recall - Takata
* Takata due before U.S. congressional panel on Weds (Adds background on U.S. regional recall, Japan stance)
TOKYO, Dec 2 (Reuters) - Takata Corp is preparing to comply with a U.S. order to expand a region-specific recall nationwide, the Nikkei said on Tuesday, a move that's likely to add millions more to the tally of cars called back to replace potentially deadly air bags.
The U.S. National Highway Traffic Safety Administration (NHTSA) last week gave Takata, which supplies about a fifth of the world's air bags, until Tuesday to declare that its air bag inflators are defective and issue a national recall. If it does not, NHTSA could begin steps to fine the Japanese company up to $7,000 per vehicle, as well as force a recall.
The Nikkei business daily said Takata was making final preparations to expand what has been called an 'investigative' recall, which has so far been limited to hot and humid areas where the air bag inflators are thought to be more prone to fail. It did not say where it got the information.
A Takata spokeswoman said no decision had been made, adding that no board meeting had taken place on Tuesday.
The U.S. regional recall has involved 4.1 million cars, more than half of those made by Honda Motor Co, Takata's biggest customer. Takata has so far resisted a wider recall, saying that could divert replacement parts away from the regions thought to need them most.
In total, some 16 million cars have been recalled worldwide in recent years for potentially faulty Takata air bags. Five deaths have been linked to its inflators, which can explode with too much force and spray metal shards inside the vehicle.
Japanese auto regulators have said they would also push for a recall of affected vehicles at home if Takata complies with demands for a U.S.-wide recall. That would affect 200,000 cars, mainly from Honda and Mazda Motor Corp, the transport ministry said last week. Around 2.6 million cars have been recalled in Japan to date.
Japan may yet see more recalls for a separate problem reported last month of an "unusual deployment" of a Takata-made air bag in a scrapped car. The inflator was manufactured in January 2003 at Takata's Monclova factory in Mexico and had not been subject to previous recalls.
The Nikkei said Takata is set to work with automakers to determine how many vehicles would need to be recalled, and the company would explain its decision at a second U.S. congressional hearing scheduled on Wednesday.
Shares of Takata ended up 3.1 percent on Tuesday, against a 0.4 percent rise in the benchmark Nikkei average. (Reporting by Chang-Ran Kim and Mari Saito; Editing by Chris Gallagher and Ian Geoghegan)