An error-prone Osaka struggled with her rhythm and faded badly against Stephens, who won 7-5, 4-6, 6-1 in two hours and 25 minutes.
The 21-year-old came into the season finale as the in-form player, having won 14 of her previous 16 matches and capturing the US Open.
It has been a whirlwind for Osaka since her stunning victory over Serena Williams at Flushing Meadows in September.
“I haven t gone home (to Florida) since the US Open. So of course I d love to go home, but I m here right now and I want to do well,” she told reporters.
“I want to give them (fans) a good match to watch. So for me that s my main priority, and I m not really tired of that yet. So I just want to keep seeing how far I can go.”
The world number four was visibly frustrated several times and dropped her racquet in disgust after failing to close out the second set in the ninth game.
Osaka, who had 46 unforced errors, said she hoped to keep her emotions in check moving forward.
“I am a little bit apologetic for doing the stuff that I did,” she said. “I feel like for me I play better when no one knows what I m thinking. I think I learned a lot from today.”
Osaka has experienced a surge of popularity since her Grand Slam breakthrough and had the crowd at the Singapore Indoor Stadium on her side.
“It was really awesome. I wasn t really expecting it,” Osaka said of her support. “I heard a lot of cheers. I m just really grateful.”