Sindhu, seeded 11th, was second best in the battle of attrition, going down 17-21 21-19 16-21 to the eighth seed in a match lasting an hour and 22 minutes.
The 20-year-old India had won back-to-back bronze in the previous editions of the Championships in 2013 and 2014.
The Hyderabadi had raised hopes of a third consecutive medal when she stunned China's Olympic champion Li Xuerui in the pre-quarterfinals yesterday.
Star player Saina Nehwal is now India's sole hope for a medal at the prestigious event. She plays her quarterfinal against Wang Yihan of China later today.
Earlier today, Jwala Gutta and Ashwini Ponnappa also lost to the Japanese duo of Naoko Fukuman and Kurumi Yonao 23-25 14-21 in the women's doubles quarterfinals. The top-ranked Indian pair failed to convert the chances in the first game before running out of steam to lose in straight games.
Jwala and Ashwini, seeded 13th, had upset eighth seeds Reika Kakiiwa and Miyuki Maeda of Japan to make the quarterfinals.
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