Two-time Olympic medallist Sindhu was firmly in control, leading 21-11, when reigning world champion Yamaguchi, hampered by a knee injury, informed the chair umpire that she could not continue.
In the decider, Sindhu looked to be completely out of her depth as Yamaguchi raced to a 5-0 lead.
Sindhu registered her career's biggest triumph at the World Championship in Basel, Switzerland in August, but since then the Indian looked awfully out of form.
Sindhu, the Rio Olympic silver medallist, has had a roller coaster fortnight in which she finished runner-up at the Indonesia Open and lost in the quarter-final of the Japan Open, losing to Japanese shuttler Akane Yamaguchi on both occasions.
Sindhu, who reached the final in Indonesia Open but lost in the Japan Open quarterfinals last week, will not take the court in the Thailand Open main draw, which begins on Wednesday.
Seeded fourth, Sindhu will open her women's singles campaign against unseeded Chinese Han Yue, whom she easily overcame in the first round of Japan Open.
Sindhu lost to Yamaguchi 18-21 15-21 in a 50-minute women's singles quarterfinal match. This was Sindhu's second defeat at the hands of Yamaguchi.
The Indian lost 18-21, 12-21 in a semifinal lasting 45 minutes.
Sindhi lost 15-21, 16-21 in less than an hour to suffer her fifth defeat to Yamaguchi. This was the 15th meeting between the two players and Sindhu still holds a 10-5 head to head lead over the Japanese shuttler.
Sindhu had stormed her way into the finals and it was expected that she might win her first title this season. However, she failed to cross the final hurdle.
