Osaka, who retired during last year's edition of the lucrative year-ender with a hamstring injury, had been due to play world number one Ashleigh Barty later on Tuesday.
"I'm disappointed to have to withdraw from the Finals," Osaka said. "It has been a great event in Shenzhen, and it's the biggest WTA event of the year."
"This is not how I wanted to end this tournament or my season. I look forward to getting healthy and hope to be back here in Shenzhen next year," she added.
Osaka had started the $14 million round-robin tournament with a tough three-set victory over Petra Kvitova on Sunday to extend her winning streak to 11 matches after titles in Beijing and Osaka.
She had been determined to make amends for a disappointing WTA Finals debut last year, when her winless campaign ended with her retiring in tears against Kiki Bertens due to a hamstring injury.
World number 10 Bertens will replace Osaka for the remaining matches and plays Barty in Red Group action on Tuesday.
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