UPDATE 1-G20 summit draft communique calls for promotion of free trade - media

* G20 to call for need to create positive economic cycle

* As chair of G20, Japan working for middle ground on trade

* G20 leaders to gather in Osaka for 2-day meeting from Fri (Adds detail, background)

TOKYO, June 26 (Reuters) - Leaders of the Group of 20 major economies will likely call for the "promotion of free trade" as a means to achieve strong global growth when they meet for a summit this week, Japan's Asahi newspaper reported on Wednesday.

In a draft communique, the G20 nations also stressed the importance of creating a positive cycle where the benefits of solid growth are distributed broadly across economies, the Asahi said.

The bitter U.S.-China trade war has hurt business sentiment and jolted financial markets, casting a shadow over the two-day G20 summit to be held in Osaka, western Japan, from Friday.

Under pressure from the administration of U.S. President Donald Trump, the G20 removed a phrase calling for the need to resist protectionism from its communique at last year's summit in Buenos Aires.

A communique signed off by the G20 finance leaders at their meeting earlier this month also does not include the language denouncing protectionism.

But some European countries are demanding that upcoming summit's communique include language warning against the spread of protectionist policies, the Asahi said.

Japan, which chairs this year's G20 meetings, is seeking to find a compromise and the current draft communique has a phrase endorsing the promotion of free trade, the paper said.

Markets are focusing on whether Trump and Chinese President Xi Jinping could lay the path toward resolving the trade tension when they are scheduled to meet on the sidelines of the G20 summit. (Reporting by Leika Kihara; Editing by Stephen Coates and Sam Holmes)