Iran's national team will play with UAE in the Pantai Batu Buruk, Kuala Terengganu on Saturday.
Iran also qualified for the 2017 FIFA Beach Soccer World Cup in Bahamas.
The Japanese will now play Lebanon in the tournaments third-place Play-off for Asia's final slot in the Bahamas. Both the Play-off and the final will take place on Saturday.
Japan drew first blood through Takasuke Goto's neat header, but Iran equalised soon after thanks to a fine strike by skipper Mohammad Ahmadzadeh.
A succession of Iranian attacks then tested Japans resolve, the pick of which was a header by Hassan Abdollahi which hit the woodwork.
However, it was Japan who were to regain the lead as Takuya Akaguma struck home from distance after catching custodian Hamid Behzadpour unaware, before Moslem Mesigar delivered a free-kick which skipped off the sand and into the goal to level matters for a second time.
Japan scored a third courtesy of Takaaki Oba, only for Mohammadali Mokhtari to make it 3-3 at the end of an entertaining first period.
Japan duly made it 4-3 following skipper Ozu Moreiras magnificent free-kick a minute into the second period. Not to be outdine, Iran hit back yet again, Abdollahis set-piece striking the post before going in to continue the games roller-coaster nature.
Iran went ahead for the first time when Mokhtari claimed his second in the match a minute before the buzzer, and they duly increased their advantage as Ahmadzadeh fired home to double his tally after the restart.
Akaguma then reduced the deficit with an impressive volley, only for Iran to score yet again through Abdollahi and, despite Goto giving Japanese hopes a brief lift with a late effort, secure a hard-fought victory.
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