The Matildas had arguably their best performance of the Asian Cup but fell at the final hurdle as they did four years ago.
It was a lone strike from Kumi Yokoyama which saw Japan crowned Champions of Asia for the second time.
Despite the loss, Matildas coach Alen Stajcic said it was the best performance of the tournament.
"It's probably the best we've played in a long time and unfortunately we didn't get the rewards tonight," he said.
"It's almost the exact opposite semifinal where we didn't play our best and got the win," Stajcic said.
Not much can be faulted in the performance against Japan as the Matildas dominated across the field and had close to 60 percent overall possession but the side was let down in the attacking third as they failed to convert.
The Matildas had 23 shots with six on target during the game compared to Japan's three on target.
Finishing has been a problem throughout the tournament for the side as statistics show the 11 goals scored, 24 of them were on target.
However, one of the most quizzical moments of the match was the choice for Elise Kellond-Knight to take the penalty instead of a striker.
In theory, a striker should be the one stepping up and taking the spot kick but those watching didn't see that happen and it could have changed the game if the Matildas went 1-0 up.
However, football is a team sport and missed chances from teammates after the penalty will be closely looked at heading into the coming months.
"We haven't played our best football at different times, we have lacked that cutting edge in the penalty box so something we have to improve," he said.
"There are a lot of good things to take away but for us we set ourselves the objective of winning this tournament.
"I know the players will be disappointed tonight but football is a cruel game sometimes, we played poorly and won in the semifinal and we played well and lost," Stajcic said.
There are still positives to take away from the game, one of the biggest being that despite their lacklustre performance against Thailand, the team were able to put a disappointing performance behind them to focus on the final, which is truly a testament to them.
With 15 months to the World Cup, there is still work to be done for Stajcic and the players but they are set to have a good preparation with Tournament of Nations later this year and Algarve Cup early in 2019.