Sindhu is the only Indian left in the competition.
Sindhu defeated Aya Ohori of Japan 21-14, 21-17 in 39 minutes to enter the third round.
While second seed Sindhu eased past Hong Kong's qualifier Leung Yuet Yee 21-18, 21-10, Saina registered a hard-fought 21-19, 23-21 win over Denmark's Mette Poulsen.
On the other hand, World No.6 Ratchanok has never reached the final here, her best performance being the semis in 2015, while Sindhu finished runner-up in the tournament past year as she lost the summit clash in straight games to Tai Tzu-ying of Chinese Taipei.
Sindhu dominated the game from the beginning, ending the game in less than 40 minutes. Yamaguchi is on a roll in the last few weeks and had even routed Sindhu at the French Open last month.More news: NYC weather: Thanksgiving weekend to remain clear but chilly
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Sindhu will now compete in the final fours on Saturday against Thai shuttler Ratchanok Intanton, who reached the semi-final after beating Canadian star Michelle Li by 21-14, 21-16.
After winning the first game, Saina could not step up the pressure and was beaten by the Chinese shuttler in the next two games.
The former World No. 1 has a tough challenge up next as she faces the eighth seeded Chen Yufei for a place in the quarter-finals. It was their first-ever meeting.
In men's singles, shuttler HS Prannoy had lost 11-21, 21-10, 21-15 to Kazumasa Sakai of Japan in the second round to exit from the event.