The Rio 2016 bronze medallist and 2015 world 81kg champion was awarded victory in the final on Saturday when Fujiwara - last year's world silver medallist - received his third shido penalty.
This was an important win for Nagase who is currently 15th in the world rankings, three spots behind Fujiwara.
World number 11 Sasaki Takeshi is the other man in the fight for the sole Japanese Olympic berth in Tokyo.
Fujiwara had beaten Saeid Mollaei in the quarter-finals, landing a superb throw against the 2018 world champion who was making his debut in the IJF Refugee Team after leaving Iran.
Mollaei then lost out in the repechage to Dutchman Frank De Wit, who went on to take a bronze medal.
Setback for Tashiro
Miku Tashiro suffered a blow to her Olympic aspirations as she went down to Masako Doi in the semi-finals of the 63kg competition.
But Budapest Grand Prix winner Doi beat Tashiro 45 seconds into golden score time with a tomoe nage throw for waza-ari.
After Tashiro defeated Korea's Han Hee-Ju to take bronze, Doi retained her Osaka title with a 20-second sankaku leg lock for ippon on compatriot Nana Kota in the final.
It means Tashiro has a fight on her hands if she is to represent the host nation at Tokyo 2020.
Japan sweep golds on day two
In the battle of former world champions, Masashi Ebinuma defeated Soichi Hashimoto to take the 73kg title.
With reigning world and Olympic champion Shohei Ono missing due to a finger injury, 2017 world champ Hashimoto went into the tournament as the favourite.
It was an epic contest with no score until five minutes into golden score time.
And Ebinuma, who won the last of his three 66kg world titles in 2014 as well as bronze medals at London 2012 and Rio 2016, took advantage of a failed rear-sacrifice (sumi gaeshi) throw from his compatriot to enforce an upper body hold which Hashimoto could not escape.
Ebinuma wept with joy as he left the mat after claiming his third Grand Slam title.
Dutchwoman Kim Polling was the only non-Japanese through to a final on day two in Osaka.
But she could not prevent a home clean sweep as Yoko Ono, a two-time mixed team World Championship gold medallist, won the 70kg event.
Ono thought she had won at the end of normal time when she scored with an ashi-waza leg sweep, but a video review saw the point reversed.
That meant golden score time and the 2018 world bronze medallist applied a chokehold which forced Polling to tap out and concede the match.
Ono is the third Japanese in the 70kg world rankings behind Asian Games champion Saki Niizoe and double world champion Chizuru Arai, making her unlikely to make the cut for Tokyo 2020.
Japan have won eight out of nine golds so far in Osaka and will hope to boost that tally on the final day.
Akira Sone will hope to succeed where fellow world champions Uta Abe and Joshiro Maruyama failed by taking victory in the women's +78kg class to book her place at Tokyo 2020.
But she will not have things her own way with Cuba's London 2012 gold medallist Idalys Ortiz and 2018 world champion Sarah Asahina in the field.
Double Olympic bronze medallist Mayra Aguiar will bid for gold in the women's -78kg with world silver medallist Shori Hamada set to be the Brazilian's biggest obstacle.
On the men's side, there could be a rematch of this year's 90kg world final with Noel van 't End of the Netherlands hoping to repeat his win over Japan's Shoichiro Mukai.
World bronze medallists Aaron Wolf and another Dutchman, Michael Korrel, look set to battle it out at -100kg.
And Roy Meyer will be favourite in the +100kg class in the absence of double Olympic champion Teddy Riner, world champion Lukas Krpalek and Japan's world and Olympic silver medallist Hisayoshi Harasawa.