Australian Kaarle McCulloch lacked the speed to hold off rising New Zealand track cycling star Ellesse Andrews in the opening round of the sprint.
The day after winning a surprise silver in the keirin at the Olympics, Andrews powered past McCulloch on the last lap to put the Australian into the repechage.
McCulloch did everything right tactically on Friday at the Izu Velodrome, but her 21-year-old opponent was just too fast.
The Australian then beat Mexican Yuli Verdugo and South African Charlene du Preez to stay alive, with the women's second round and repechage also to be run on Friday.
McCulloch qualified 14th fastest for the sprint in 10.679 seconds, while German Lea Sophie Friedrich set the Olympic record of 10.310 for the flying 200m.
The top 17 women went under the old Olympic mark of 10.721.
Also on Friday, the Australian team confirmed top sprinter Matthew Glaetzer would compete in Saturday's keirin.
Glaetzer pulled out of Wednesday's sprint qualification because he was unwell.
He was part of the team sprint that finished fourth and Glaetzer, a three-time Olympian, is yet to win a Games medal.
The powerful Dutch sprint group will win another gold, with Jeffrey Hoogland and Harrie Lavreysen winning their semi-finals.
Russian Denis Dmitriev and Jack Carlin of Great Britain will ride off for the bronze medal.
Hoogland and Lavreysen were in the team sprint combination that won the gold medal and Shanne Braspeninnincx took out the women's keirin.
Annette Edmondson and Georgia Baker are the other Australians competing on Friday at the velodrome.
They will ride in the 30km madison, which is making its Olympics debut as a women's event.
