The Italian damaged the scaphoid in his left wrist in a motorcross accident last week. A screw was inserted into the bone on Tuesday, but he still hoped he would be able to participate in this weekend's race.
However after struggling for speed in the two practice sessions, Simoncelli admitted that he was in too much pain to compete.
"I tried to get some laps in but I'm not confident enough to race," he said.
"I was able to do a couple of fast laps but my hand quickly got sore and I can't ride as I'd like. Now I'd prefer to not get back on track and race, because of the risk for the rest of the season."
He is confident that he will be ready to race again in round two at Motegi.
"With an extra few days of rest I should be fit for the Japanese GP," Simoncelli said.
During his title-winning 2008 season, Simoncelli failed to score in the first two races but still came through to beat Alvaro Bautista to the championship.
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