The Indian pair, who had won the Syed Modi International Badminton Championships at the beginning of the year, made a good start to their semi-final clash by winning the first game.
However, they failed to capitalise on the same and went down against Japanese duo of Takuro Hoki and Sayaka Hirota in the last two games of a thrilling clash that lasted exactly an hour.
The final score read 21-14, 15-21, 19-21, in favour of Hoki and Hirota.
Pranaav and Sikki had earlier played one of the finest matches of their career when they lowered the colours of Koreans Seo Seung Jae and Kim Ha Na by a 21-18, 9-21, 21-19 margin in two minutes under the hour.
Prior to this tournament, this Indian mixed doubles pair could not progress beyond the second round at a Superseries event.
The performance of Pranaav and Sikki was the only positive for India in Tokyo as Olympic silver medallists P.V. Sindhu and Saina Nehwal fell in the second round of the tournament while Kidambi Srikanth and H.S. Prannoy were defeated in the quarter-finals.
Parupalli Kashyap, on the other hand, had failed to qualify for the main draw on Tuesday.