* Big manufacturers' sentiment index plus 7 vs f'cast plus 9

* Non-manufacturers' index at plus 23 vs f'cast plus 20

* Big firms expect to increase capex by +7.4% this fiscal year (Adds detail, context)

By Leika Kihara

TOKYO, July 1 (Reuters) - Japanese big manufacturers' business confidence worsened to a nearly three-year low in the quarter to June, a central bank survey showed, in yet another sign of the growing economic toll exerted by slowing global demand and the U.S.-China trade war.

But service-sector mood improved and companies maintained their solid spending plans, the Bank of Japan's closely watched "tankan" survey showed on Monday, suggesting that solid domestic demand was partially offsetting weakness in overseas shipments.

A weekend truce in the U.S.-China trade war may also offer some respite, though analysts said there was little to cheer given soft global demand and lingering uncertainty over future developments in the trade talks.

"Japan's economy is stagnating but not falling off the cliff with non-manufacturers' sentiment and capital expenditure holding up," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"This data alone won't force the BOJ to change its scenario that the economy continues to recover moderately. But that's not to say the outlook for Japan's economy has turned positive."

The headline index gauging big manufacturers' sentiment slid to plus 7 in June from plus 12 in March, worse than a median market forecast and hitting the lowest level since September 2016, the tankan showed.

The index for big non-manufacturers rose to plus 23 from plus 21 in March, exceeding a median market forecast of plus 20.

Roughly 70% of the companies surveyed gave their replies on June 11, according to the BOJ, which meant the survey did not reflect the impact of an agreement reached on Saturday between the United States and China to restart trade talks.

CAPEX OUTLOOK MURKY

The data underscores the divergence between exporters, who are feeling the pinch from the trade tension, and service-sector firms benefiting from the resilience in private consumption.

A long public holiday in May gave a boost to retailers' sentiment as households splurged on leisure, though some firms complained that pent-up construction demand ahead of the 2020 Olympic Games may be peaking, a BOJ official told a briefing.

Big firms plan to raise their capital expenditure by 7.4% in the fiscal year to March 2020, slightly below market forecasts but roughly flat from three months ago, the tankan showed.