The Australian, who also pulled out of Atlanta in July with a similar ailment, was the champion in Tokyo in 2016 and felt he was playing good enough tennis to win it again this year.
"It's obviously very disappointing," the Wimbledon runner-up said. "It's one of my favourite tournaments. I've had great memories here. It's heartbreaking, but I'll be here next year. That's for sure.
"I've been playing amazing tennis all year and actually was dealing with a bit of a knee issue around the US Open time," Kyrgios explained. "I got back home and probably didn't take enough time off, to be honest. I went straight back into training."
Kyrgios, the No.5 seed, had been in fine form this week with singles wins against Chun-Hsin Tseng and Kamil Majchrzak. He had also progressed to the doubles semi-finals alongside fellow Australian Thanasi Kokkinakis before this latest disappointment struck.
"Obviously playing four matches and winning all four, I've been feeling great. I definitely felt like I was a threat to win the tournament and go all the way in singles and doubles," Kyrgios said.
"When your body lets you down, it's not a good feeling. I know in this case it's probably overloading rather than not being fit enough. I think it's almost being too excited to get on the court and maybe training a little bit too much. So it's positive, but heartbreaking at the same time."
Kyrgios said he plans to return to the ATP Tour later this month in Basel and Paris.
Fritz moved on to the semi-finals as a result of Kyrgios's withdrawal. The No.3 seed had not won a match in three previous appearances in Tokyo but has battled hard to advance through the draw this week in the Japanese capital.
He saw off another Australian inJames Duckworth as well as Hiroki Moriya in three sets to set up the clash with Kyrgios. Those victories came off the back of the American spending a week in full quarantine after testing positive for COVID-19 in Seoul last week.
Fritz, the Indian Wells champion, will play No.7 seed Denis Shapovalov in the semi-finals after he beat Borna Coric 6-4 6-3 in their last-eight clash.
No.4 seed Frances Tiafoe advanced with a 6-0 6-4 win against Miomir Kecmanovic and Korea Republic's Kwon Soon-woo claimed the final place in the semi-finals in Tokyo, beating Spain's Pedro Martinez 6-3 6-0.