Badosa was defeated in just 78 minutes by Zheng Qinwen, with the number one seed going down 6-3 6-2.
It was 19-year-old Zheng's first completed win against a top 10 opponent in her career, and she said afterwards: "Even though the score was like this, there were a lot of emotions for me in this match and I'm very proud of myself. It's not a surprise. I always knew I had the level, I just had to make it."
Second seed Garcia hit 27 aces in her match against Zhang Shuai, the most in a single WTA-level contest since Kristyna Pliskova against Monica Puig in Luxembourg 2019 (28), but it was not enough as she lost two tie-breaks to lose 4-6 7-6 (7-5) 7-6 (7-5).
Number three seed Garbine Muguruza had more success as she beat Greek opponent Despina Papamichail 6-4 6-2, while Claire Liu also eased to a win against Elise Mertens 6-4 6-1, and will play Zheng in the quarter-finals.
Eighth seed Elena Rybakina suffered a first-round exit as she lost to Liudmila Samsonova 6-2 6-4, who will play Xinyu next.
The seeds fared better over at the Korea Open, with Emma Raducanu sealing a first-round win against Moyuka Uchijima 6-2 6-4, while Magda Linette also eased past Arianne Hartono, 6-2 7-5, though fifth-seed Varvara Gracheva was knocked out by Anna Blinkova 6-4 7-6 (7-1).
In the second round, third seed Ekaterina Alexandrova is through after beating Han Na-lae 6-1 6-3, as is Lin Zhu of China following her straightforward 6-1 6-3 victory against India's Ankita Raina.
There were also wins for Tatjana Maria against Kimberly Birrell, and 17-year-old Andorran Victoria Jimenez Kasintseva against eighth seed Rebecca Marino.
Osaka – a former world number one – has slipped to 48th in the latest WTA rankings, and has not won a match at a grand slam since she beat Madison Brengle in the second round at the Australian Open in January.
The Japanese-born star was eliminated in the first round at the French Open and US Open this year, and did not compete at Wimbledon due to an Achilles injury.
Having taken some time away from the game last year to focus on her mental health, Osaka has struggled to get back to her previous high levels.
However, speaking ahead of the Pan Pacific Open in Tokyo, she seemed calm about the situation, as she suggested she is improving both on and off the court.
"It was kind of hard at first, just because I feel like I should be somewhere where I'm obviously currently not," the 24-year-old said.
"I think for me, it's more about being at peace with myself. I know that I'm here for a reason."
Osaka has seven career singles titles to her name, including four majors – she has won twice at Flushing Meadows and twice at the Australian Open.
"This year has not been the best year for me, but I've learned a lot about myself," she added.
"Life is ups and downs, and this year was more down than up, but overall I'm pretty happy with where I am now."
She is preparing to defend her title at the Pan Pacific Open, which has not been held in three years due to the coronavirus pandemic, starting with a match against Daria Saville on Tuesday.
"It feels really weird to hear that I'm the defending champion because it was the last time I played in 2019," she said.
"I would love to win it again, but I think just taking it one match at a time... and also just playing in front of a crowd in Tokyo again, because the Olympics was crowdless, so it will just be nice to see people."
Four-time grand slam champion Osaka won the opening game, before Saville was unable to continue due to a scary-looking injury to her left knee.
The former world number one will now face a second round match with world number 16 Beatriz Haddad Maia, who eased to a straight sets victory over Yuki Naito.
Karolina Pliskova secured her place in the next round in Tokyo with a 6-2 6-1 demolition of Isabella Shinikova, while Zhang Shuai will face second seed Caroline Garcia on Wednesday after overcoming Mai Hontama in two sets.
In Seoul, Jelena Ostapenko's hopes of repeating her 2017 heroics at the Korea Open are still alive after the number one seed narrowly beat 19-year-old Jeong Bo-young.
The world number 19 looked to be cruising after the opening set, but the unheralded South Korean hit back in the second and took it to a tie-break in the third, before Ostapenko's class showed as she won the crucial tie-break 7-2.
Elsewhere, 2021's beaten finalist Kristina Mladenovic saw off wildcard Park So-hyun 6-4 4-6 6-3, while second seed Ekaterina Alexandrova overcame a worrying second set to beat Asia Muhammad 6-1 3-6 6-1.
Wimbledon semi-finalist Tatjana Maria is also safely through to the second round after a tight 7-6 (7-5) 7-6 (7-5) triumph over Eugenie Bouchard.
The former world number one, who won the Tokyo tournament when it was last held in 2019, was unable to compete in Thursday's match due to illness.
"I am really sorry that I am not able to compete today," Osaka said. "It's an honour to be able to play at the Pan Pacific Open in front of the amazing fans here in Japan.
"This has and always will be a special tournament for me and I wish I could have stepped on court today, but my body won't let me."
Haddad Maia advanced on a walkover and will next face fourth seed Veronika Kudermetova, who defeated Mexican qualifier Fernanda Contreras Gomez 6-0 6-1 to reach the quarter-finals.
Liudmila Samsonova also progressed to the last eight, with a 7-6 (7-5) 6-3 win over Wang Xinyu continuing her good form.
However, sixth seed Karolina Pliskova exited the competition on Thursday at the hands of Petra Martic, who prevailed 6-3 6-4 and will face Zhang Shuai next.
At the Korea Open, top seed Jelena Ostapenko recovered from two games down in the deciding set to overcome Anastasia Gasanova 6-3 5-7 7-5.
Ostapenko remains on a possible semi-final collision course with Emma Raducanu, who came through 6-4 7-5 against Yanina Wickmayer, while Magda Linette saved two match points to beat Kristina Mladenovic 4-6 7-6 (7-5) 6-2.
Raducanu required just 77 minutes to see off the third seed for a 6-2 6-2 win, dominating from the outset to clinch her first final four spot in any tournament since last year's famous US Open triumph.
Having wrapped up the opener with a fierce backhand winner, Raducanu was forced to endure a brief revival from Linette in the second set, before the Pole was troubled by a thigh injury.
Linette lost 14 of the first 17 points on resumption after a medical time out, struggling with her movement as Raducanu saw out the match.
Raducanu has yet to drop a set during her run in Seoul, but will face a stern test in the semi-finals after Ostapenko overcame 17-year-old Victoria Jimenez Kasintseva 6-2 6-1, setting up a first career meeting between the duo.
On the other side of the draw, Ekaterina Alexandrova earned a hard-fought 7-5 7-6 (8-6) win over Lulu Radovcic, but fourth seed Zhu Lin crashed out to Tatjana Maria, losing 6-1 6-1.
In the Pan Pacific Open in Tokyo, meanwhile, Garbine Muguruza fell to a shock 6-4 6-2 quarter-final defeat to Liudmila Samsonova, handing the Russian her 16th win in her last 17 outings.
She will meet Zhang Shuai in the next round, after she became the first Chinese player to make the last four in Tokyo since 2009 by beating Petra Martic 7-5 6-2.
In a battle between the competition's fourth and fifth seeds, meanwhile, Veronika Kudermetova rallied to beat Brazil's Beatriz Haddad Maia 6-7 (4-7) 7-6 (8-6) 6-1.
The 2021 US Open winner was featuring in her first semi-final since that fairytale triumph at Flushing Meadows, and took the opening set 6-4 after making a flying start on Saturday.
Ostapenko then fought back to level the match, with Raducanu first appearing to struggle with her movement when she was a break up in the second, forcing her to take an off-court medical timeout.
The 19-year old later retired citing a left glute injury when 3-0 down in the decider, ending her confidence-boosting run in Seoul and teeing up a final meeting between the top two seeds.
Indeed, Alexandrova enjoyed a more routine outing in her meeting with Wimbledon semi-finalist Tatjana Maria, downing the German 6-2 6-4 to advance to her second final of the year.
At the Pan Pacific Open in Tokyo, meanwhile, Chinese teenager Zheng Qinwen reached her first WTA Tour final with a hard-fought win over world number 13 Veronika Kudermetova.
Having required over three hours to seal her 5-7 6-3 7-6 (7-3) triumph, the world number 36 said: "After the match when I won the last point, the feeling was incredible.
"The opponent, she's playing unbelievable tennis. She has a really good serve and hits the ball hard, she moves well. It's my first time in the final. I'm so happy."
Her compatriot Zhang Shuai was unable to replicate those exploits, however, as Liudmila Samsonova eased into her third WTA final of the year with a 7-6 (7-4) 6-2 win.
In-form Samsonova has won both of her previous final appearances this year - each of which came last month - and is 3-0 in showpiece matches for her career.
Riske-Amritraj reached the last 16 at the US Open earlier this month but has struggled in Asia since then.
She was the top seed at the Chennai Open last week, only to lose in straight sets in the first round to Anastasia Gasanova.
And the American fell at the first hurdle again in Japan.
Riske-Amritraj was drawn against compatriot Claire Liu, who was coming off back-to-back defeats to Anastasia Potapova and without a win since qualifying for the Canadian Open last month.
But Liu brushed aside the seventh seed 6-2 6-3 to set up a meeting with Elise Mertens in the second round.
Mertens eased through with a 6-0 6-3 win over Wang Qiang, while Petra Martic was similarly comfortable in a 6-1 6-1 defeat of Rina Saigo.
Saigo was one of two home hopefuls to depart on Monday as Qinwen Zheng won 19 points in a row en route to beating Misaki Doi 6-2 6-4.
At the Korean Open, Zhu Lin was the only seed in action and got the better of Jang Su-jeong in straight sets.
Zheng beat top seed Paula Badosa and fourth seed Veronika Kudermetova en route to her first WTA final.
However, the 19-year-old was undone by Samsonova, who has now won 18 of her last 19 matches, claiming three titles in that run.
Her 7-5 7-5 success in Tokyo made it two successive titles won without dropping a set and will move her up to a career-high ranking of 23.
Zheng, meanwhile, will become the first Chinese teenager to be ranked in the top 30. She is set to move up to 28th in the world.
"It was a really tough match because huge congrats to Qinwen and her team because she's playing amazing," Samsonova said afterwards.
"Seriously, congrats guys. It was a nervous match today. We were fighting every point. It was tough."
The 25-year-old Japanese is a two-time Australian Open winner (2019 and 2021), but tournament organisers confirmed on Sunday she will not be adding to that tally in 2023.
No reason has yet been cited for Osaka's decision, although she has not played since pulling out of the Pan Pacific Open in Tokyo in September.
Osaka endured a difficult 2022 at grand slams, losing in the first round at both the French Open and US Open, while she was bundled out in the third round of last year's Australian Open and did not compete at Wimbledon due to an Achilles injury.
The former world number one's withdrawal follows that of men's top seed Carlos Alcaraz and seven-time major winner Venus Williams due to injury.
Reigning women's singles champion Ash Barty has also since retired following her triumph in January last year.
Osaka is currently ranked 42nd in the world and will be replaced by Dayana Yastremska in the main draw.
