Last month, Japan rounded off a dominant Asian Cup campaign by defeating tournament hosts Australia 1-0 in the final to win the continental title for the third time in the last four editions.
The team also booked their spot at the 2027 Women's World Cup in Brazil after reaching the semi-finals of the Asian Cup.
"Nils Nielsen, head coach of Nadeshiko Japan (the Japanese women's national team), stepped down upon the expiration of his contract," the JFA said in a brief statement.
Nielsen in 2024 became the first foreign manager of the "Nadeshiko", replacing Futoshi Ikeda, who led Japan to the quarter-finals of the Women's World Cup in 2023 as well as the last eight of the 2024 Paris Olympics.
The 54-year-old served as the director of football for Manchester City's women's team before joining Japan, and was the manager of the Swiss women's team from 2018 to 2022.
He also coached the Danish women's side from 2013 to 2017, leading them to a runners-up finish at the Women's European Championship in 2017.