Its space agency had to send a self-destruct command to the H3 rocket when its second-stage engine failed minutes after lift-off.
Observers say it is a significant setback for Japan's Aerospace Exploration Agency (Jaxa).
The government called the test failure "extremely regrettable".
The H3 rocket is the first medium-lift rocket designed by Japan in three decades.
It has been presented as a cheaper alternative to SpaceX's Falcon 9 for launching commercial and government satellites into Earth's orbit.
On Tuesday (07), engineers had aimed to send the 57m (187ft) rocket into space with a monitoring satellite on board. The ALOS-3 system is capable of detecting North Korean missile launches.
But Jaxa said soon after launch, engineers were forced to send a self-destruct prompt to the H3 after it experienced "reduced velocity" in the second stage of its launch.
Tuesday's launch came after an aborted launch in February, when the rocket failed to get off the launch pad due to faulty rocket boosters.
Source: www.bbc.com
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