The Black Sticks drew level soon after half time through Kane Russell, who scored from a penalty corner and it was game on.
Both sides launched promising attacks through the final period, but neither was able to put the final touches to a play and score a decisive goal.
With a penalty shootout needed to decide things, in which players hd eight seconds to put the ball in the goal, Japan thrived. They looked in their element in the one on one situations, and scored four in a row.
The Black Sticks didn't show the same steel in their attempts, with both Hugo Inglis and Marcus Child missing their attempts which saw Japan claim their first win of their campaign.
Head coach Darren Smith said despite the final result, the series had been valuable for the New Zealand squad's build-up ahead of the Gold Coast Commonwealth Games in April.
"I thought the end result was pretty fair, Japan started well and played some good hockey and we played a solid second half but weren't as efficient on the ball as we would have liked," he said.
"We would have liked to finish off with a win, but the series both here and in Tauranga has been the perfect scenario to go up against three other world class teams who all play different styles.
"Over the past two weeks we've had the opportunity to get more high quality experience and that all helps us hone our skills as a team leading into the Commonwealth Games."
A penalty shootout was needed to decided the gold medal match between Belgium and India after thes sides were looked at 4-4 after regulation time.
Belgium held their nerve to take a 3-0 shootout win and claim their second of two Four Nations titles.
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