"Today, together with my team, we have made this decision as I am still not 100 per cent ready or healthy to compete at the highest level.
"This decision was not taken lightly as Australia is one of my favourite places to compete," he added.
Nishikori's elbow needed surgery in October and he has not played since.
Yoshihito Nishioka will replace him as the top-ranked player in Japan's ATP Cup team in Perth. Yasutaka Uchiyama also withdrew from the event earlier this week, with Toshihide Matsui called up instead.