Johannes Rydzek had won the last three events in a row after Eric Frenzel, who took normal hill gold at Sochi 2014, had strung together five triumphs himself.
But the nearest German challenger in Falun was Frenzel in fourth place, leaving Watabe to sweep up the gold by 4.9seconds over Sochi 2014 large hill gold medallist Joergen Graabak.
Strong wind had put paid to the jumps earlier in the day as Watabe's success ensured him a third-place finish in the overall standings.
Italian Alessandro Pittin, who had not picked up any medals in the World Cup this season, rounded off the top three.
Despite his absence from the Falun podium, Frenzel broke the 1000-point barrier in beating compatriot Rydzek to first place in the overall standings by 252 points.
© Sportsbeat 2014
- Sports & Recreation
- Winter Olympics
- Eric Frenzel