* June exports -6.7% yr/yr vs forecast -5.6% in May

* Export volume -5.5% yr/yr, down eight months in row

* Trade war, China's slowdown, protectionism weigh on growth

* July manufacturers' sentiment index +3 vs June +6

* Manufacturers' mood seen improving ahead - Reuters Tankan (Adds analysts' comment, economic and policy context)

By Tetsushi Kajimoto

TOKYO, July 18 (Reuters) - Japan's exports fell yet again in June, while manufacturers' confidence crumbled to a three-year low this month as a Sino-U.S. tariff row, slowing China growth and rising trade protectionism heaped pressure on the world's third-biggest economy.

Weak exports have weighed on Japan's factory output, threatening to undermine capital expenditure and denting policymakers' hopes that domestic demand will help offset intensifying external strains.

Exports in June fell 6.7% from a year earlier, the seventh straight month of declines, Ministry of Finance data showed on Thursday, dragged down by slowing sales of tankers, China-bound car parts and steel pipes. That compared with a 5.6% drop expected by economists and a 7.8% fall in May.

Separately, the Reuters Tankan survey showed Japanese manufacturers' business confidence hit a three-year low in July, dragged down by steel/nonferrous metals and precision machinery, highlighting the fragility of the export-led economy.

The batch of gloomy data underscored bets among some analysts that the central bank will roll out more stimulus at its policy review later in the month.

A Reuters poll of economists showed expectations have risen sharply that the Bank of Japan's (BOJ) next policy move will be to ease further.

BOJ officials have said they remain ready to ease further if economic conditions worsen, joining the U.S. Federal Reserve in signalling additional monetary stimulus amid deteriorating global growth.

"Both the government and the BOJ expect global economy to recover later this year but that scenario will likely be delayed due to intensified U.S.-China trade war, worsening of Europe's economy and the U.S. economy heading to a soft landing," Takeshi Minami, chief economist at Norinchukin Research Institute, said. "Japan's exports will remain weak for the time being."

Marcel Thieliant, senior Japan economist at Capital Economics, said he estimated that net trade knocked off 0.3 percentage points from gross domestic product growth in the second quarter and he expected that drag to persist through to the third quarter.

Indeed, the economic strains showed no signs of abating as a lack of progress on U.S.-China trade negotiations and heightened global uncertainty weighed on corporate spending.