The Sunwolves, Japan's representatives in Super Rugby, have been by the competition's governing body SANZAAR in March that they would be removed from the competition from 2020.
Jones, who now coaches England, lamented the decision and said the Japan Rugby Football Union should start looking for alternative competitions.
"If Japan wants to be a top 10 country in the world, which they do, they need their players to be prepared," Jones told Kyodo news agency on Tuesday.
"The purpose of the Sunwolves was to give opportunities for young Japanese players to prepare for test rugby," said Jones.
"What Japan was missing was that opportunity for younger players to go from a good domestic Top League into a higher level of competition without being exposed to test level, and the Sunwolves provided that opportunity.
"It hasn't worked out for them and I think it is a massive opportunity missed."
Japan, who host the 2019 World Cup beginning on Sept. 20, have made huge strides since their famous victory over South Africa at the 2015 Rugby World Cup under Jones.
They have recorded comfortable wins over Italy (2018) and Tonga (2017), and managed a draw with France in Paris (2017).
The Brave Blossoms also pushed Jones' England when the two sides met at Twickenham in November before the home side prevailed 35-15.
Jones believes much of this improvement is down to competing in Super Rugby.
"Absolutely, 100 percent," said Jones.
"They were physically in a different condition because they have to and they believe they can win now, which is massively different from the side I first inherited."
The Sunwolves currently sit bottom of Super Rugby's Australian Conference with two wins from nine matches played.
(Reporting by Jack Tarrant; Editing by Amlan Chakraborty)
