Manika lost 7-11, 11-8, 8-11, 6-11 in 20 minutes against the second-seeded Japanese, who finished third in her group because of a tie.
The Indian, who had qualified for the Asian Cup through regional quota, put up a brave show but she was unable to negotiate the Japanese's forehand and clever use of the flanks.
Manika's counter and blocks had little effect on the 17- year-old and yet the former national champion managed to stretch her opponent in every game than expected, including taking a game off her.
In the second match, Su Hyowon of Korea accounted for Lee Ho Ching of Hong Kong 3-1 to enter the main draw.
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In men singles challenge playoff, Lee Sangsu, who beat Sharath Kamal yesterday, defeated Noshad Alamiyan from Iran in a tough match that went down to the wire.
The Korean won 3-2 to advance into the last-eight stages along with Taipei's Chen Chien-An. The latter beat Nima Alamian 3-1, also from Iran.
Playoff Challenge:
Men: Lee Sangsu (KOR) bt Noshad Alamiyan (IRI) 11-4, 10- 12, 11-13, 11-2, 12-10, Chen Chien-An (TPE) bt Nima Alamian (IRI) 11-5, 4-11, 11-8, 11-7.
Women: Miu Hirano (JPN) bt Manika Batra (IND) 11-7, 8-11, 11-8, 11-6; Su Hyowon (KOR) bt Lee Ho Ching (HKG) 11-9, 11-13, 11-9, 11-9.