The Thornhill, Ont. native, who was a Wimbledon semifinalist and twice runner-up in the Japanese capital at the ATP 500 event, needed only 74 minutes to defeat Austria's 33-year-old veteran after losing to Melzer in 2012 indoors in Memphis.
Raonic, who is fighting for a place in the year-end final in a field limited to eight players, will aim for the Japanese semifinals on Friday when he takes on Denis Istomin. The Uzbek beat Poland's Michel Przysiezny 6-4, 7-6 (5) to book his spot.
Raonic stands provisional ninth in the points race to the World Tour Finals next month in London and is trying to close the gap on Tomas Berdych, who currently stands one place ahead of him on the last of the qualifying spots.
But with this week in Japan, plus Shanghai next week and then three final weeks in Europe, there is plenty of tennis left to play.
Raonic secured his victory over Melzer with a modest 11 aces — half for his total in the previous round — breaking the Austrian three times.
"I'm playing good tennis right now, I lifted my level form the first round," said the Canadian. "But I'm not thinking too far ahead.
"I can only handle one challenge at a time so I'm not considering another final yet," said the highest seed remaining in the field.
Raonic took the opening set in 36 minutes on his first set point with a break of Melzer.
Melzer had his left ankle wrapped at the start of the second set, but his physical problem did not see to impair his mobility.
In the second, Raonic went up a break for 2-0 but lost the edge in the fifth game, with Melzer getting the break back after putting Raonic in a 0-30 hole.
The 23-year-old Canadian was caught out by two straight passing winners to drop the game, 3-2. Melzer levelled at 3-all a game later on an ace.
Raonic earned a second break for 5-3 after Melzer was caught out by a down-the-line winner. Then he served out his 41st win of the season a game later to advance.
The Canadian said that even though he let his break advantage slip in the second set, he was able to fight back.
"I think he lifted his game in the second set. I had one poor game and he played well to break."
Raonic stands 2-0 over Istomin, winning both of their matches in San Jose, where the Canadian won three tiles.
"He can do a lot of thing impressively," Raonic said of his next opponent, "I have to keep getting better and better and create opportunities. I have to really contain him as much as I can."