The Scot, who had not dropped a game on her way through to Sunday's final, lost out 19-21, 21-19, 21-18.
Gilmour, runner up at the European Championships in Denmark in April, had beaten Kawakami in their one previous meeting last year.
However, the 23-year-old Commonwealth Games silver medallist was edged out in a tight contest.
Kirsty Gilmour lost to Japan's Saena Kawakami in the final of the Canada Open in Calgary.