Number one seed Hingis, trying for an unprecedented third straight title at the event, came out guns blazing and took the set to love.
In the second, Hingis had trouble spotting her first serve and Sugiyama pounced on the second serve offerings of the Swiss player as Hingis lost some of the precision on her shots.
Sugiyama was able to break Hingis three times in the second and showed patience on the baseline as she won the set 7-5 to go into the third all square at 1-1.
The third looked to be up for grabs as both players opened the with breaks, but Hingis took control of the match when she broke the Japanese ace in the third game and held in the next game to give herself a 3-1 lead.
World number 49 Sugiyama has seen her singles ranking slip over the past year from being among the world's top 20 to her current position after a dismal showing in Australia.
Hingis is looking to rebound from her finals loss at the Australian Open with a victory in the £800,000 tournament.
Russia's Anna Kournikova battled her way through to a 7-6 (7-4) 6-2 win over Frenchwoman Anne-Gaelle Sidot.
Kournikova lost her serve to go down 4-5 and 5-6 in the first set.
But the third seed she broke back each time to force a tie-breaker in which she notched up a comfortable 4-1 lead before finishing off her challenge.
Japan's Shinobu Asagoemeets beat Bulgarian number eight seed Magdalena Maleeva 6-1 7-6 (7-1).
Number two seed Lindsay Davenport beat Croatia's Iva Majoli 6-2 6-0 in the other quarter-final.