The World No.8, who had a 2-1 record going into the match, lost 14-21, 18-21 to the sixth seed Chen in a 42-minute match at the Tokyo Metropolitan Gymnasium.
Kashyap, who was the lone surviving Indian after top shuttlers Saina Nehwal, Kidambi Srikanth and H S Prannoy made early exit in the second round, found the going tough against Chen today.
In the first game, Chen opened up a 5-2 lead early on and even though Kashyap drew parity with three points, the sixth seed broke off at 8-8 and never looked back to earn the bragging right.
The Indian kept breathing down his neck and even made it to 18-20 but Chen ensured their was no hiccup as he shut the door on Kashyap and entered the semifinals of the tournament.
"I could not play my game today. There was a lot of mis-hitting the shuttle and also I made a few wrong judgements," Kashyap told PTI.
Kashyap will next play in the Korea Open.
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