Kerber leads the head to head series 2-1, with all of the matches being played last year.
The seventh-seeded Kvitova won when Williams' return was long to close the match at Ariake Colosseum in 2 hours, 24 minutes.
Kvitova dominated the tiebreak, jumping out to 6-0 lead. Williams got two points back before Kvitova capitalized on her third match point.
"I am really happy with how I played today,'' Kvitova said. "It was a very close match, and every game was up and down.''
Kvitova held off 11 break points.
Williams was bidding for her first title since last October, when she won in Luxembourg.
"I was probably a little tired,'' said Williams, who endured a 3-hour, three-set match on Thursday. "But I don't think it affected the match. She played two matches yesterday, so no doubt was a little tired, as well.''