MORE: MATILDAS' AFC ASIAN CUP PHOTO GALLERY
The deciding goal came in the first half after the Australians switched off from a corner allowing Azusa Iwashimizu to scramble home the eventual winner giving Japan their first Asian Cup trophy.
Despite a barnstorming finish from Alen Stajcic's women, a tiring Japan were able to hold on.
The Australians were on top early at the Thong Nhat stadium with Sam Kerr almost getting them off to a sensational start.
A brilliant ball through from Lisa De Vanna inside the first 60 seconds wasn't dealt with but the Sydney FC striker sliced the ball over with only the keeper to beat.
Kerr took advantage of sloppy Japanese defence minutes later but again wasn't able to connect while a Heyman header was directed straight at the Japanese keeper Fukumoto.
Japan slowly worked their way back into the contest and it was no surprise when the they hit the front on 28 minutes.
A clever variation from a corner saw the ball played to the edge of the box before a deep curling cross to the far post caused confusion in defence with Iwashimizu directing her header between a clutch of defenders and keeper Lydia Williams before it rolled over the line.
And with confidence up, Japan began to open up the Aussies with their trademark clever, technical play from the likes of Kawasumi and Miyama causing all sorts of problems.
With the green and gold lacking the desire to chase it was all Japan.
Heyman sought to shake things up with a hefty shoulder challenge on Sawa, the Japanese number 10. And De Vanna again with a brilliant ball through for Heyman but the Canberra striker was just beaten to it by keeper Fukumoto.
The Australians went into the break down a goal and needing inspiration from coach Alen Stajcic.
They began the second half with Laura Alleway on for Alannah Kennedy in central defence.
Soon Australia showed greater intensity pushing bodies forward from deep against a tiring Japan.
Kerr combined with Heyman but the Canberra star's powerful strike from outside the box went straight into the arms of the keeper.
Heyman almost had the equaliser on 53 minutes but her tame shot was easily dealt with.
Minutes later a brilliant ball into the box from Van Egmond found Heyman but she was unable to get on the end of it as the Matildas began to get on top.
Tameka Butt came on for Egmond on the hour mark as the Aussie looked to turn the screws but were lacking the composure in front of goal.
Alen Stajcic's final change was Caitlin Foord on for the misfiring Heyman as the Matildas rolled the dice with 25 minutes to go.
Japan could and should have gone two up when Sugasawa hit the bar inside the box yet just seconds later Katrina Gorry with her first real involvement set up Kerr with a perfect cross into the box but the volleyed goal was deemed offside.
The fresher Australians pressed in the latter stages with Kerr going close, but the Japanese aren't world champions for nothing and held on for a famous win in Vietnam 1-0.