Eighth seed Nishikori sealed the opening set tie-break with a running backhand pass, celebrating with a clenched fist in front of a sell-out 13,000 crowd in Tokyo.
Raonic hit back in the second set, the sixth seed - who beat US Open champion Andy Murray in his semi-final - producing some trademark big serving on the way to levelling the match.
But Nishikori dominated the decider, ripping another fierce backhand pass down the line to open a 4-0 lead.
And he closed out a final-set 'bagel' when a lofted return forced Raonic to volley into the net, ending the contest after two hours and eight minutes.
Nishikori, whose only previous ATP Tour title came at Delray Beach in 2008, will rise two places to 15th in the world rankings thanks to his exploits.
"I have not been able to play well in Japan until now, so I always thought perhaps I was not mentally strong enough to do so," Nishikori told the ATP website.
"On one side of my mind, I cannot believe I won the tournament, but at the same time, I feel that I'm happy I was able to do this.
"Despite the break in the first game, there were some dangerous moments in the first set. I tried to stay aggressive.
"I was able to continue doing so and was able to get the final set 6-0."