John Aloisi had fired the Socceroos into a 70th minute lead with a close range finish from Harry Kewell's inviting corner, but after Naohiro Takahara quickly levelled for Japan and Vincenzo Grella was dismissed with 14 minutes remaining it was always going to be hard for Arnold and his side.

Kewell and Lucas Neill both saw their spot kicks saved by Japan goalkeeper Yoshikatsu Kawaguchi and despite Tim Cahill, Nicky Carle and David Carney all converting, veteran Japan defender Yuji Nakazawa stepped up to seal the 4-3 victory.

"We have learned a lot in the last couple of weeks, Asia is very difficult. The expectations I put on the team were semi-finals minimum and so obviously it's below expectations," said Arnold.

"This is the toughest loss I have suffered in my coaching career, guaranteed. We have done a lot of work to get where we are and I think the players responded. Our form wasn't great in the first two games, but I thought we showed a huge improvement over the four games.

"I was extremely proud of the players because of the performance they put in these conditions. We were a man short for a long time and they worked very hard and I couldn't be more proud."

Arnold admitted the 76th minute dismissal of Parma midfielder Grella for an alleged elbow on Japan striker Takahara was the turning point.

"The red card was unexpected. In these conditions to play with 10-men it's murder when the players aren't used to it, but the whole of Australia should be very proud of the players," added Arnold.

"They gave everything they had. We had to defend a lot because of the extra man; it's always hard to play with 10 men against a quality side like Japan."

Japan coach Ivica Osim, who returned to the dressing room until the shootout was over, insisted his side deserved their place in the semi-finals after admitting he was "satisfied" with the performance for the first time in his career with the national team.

Osim has been reluctant to say he was "satisfied" with any of Japan's previous outings, insisting a coach should never be content with the performance of his side.

"It would have been much nicer if we could have finished the game without playing the shootout. But even if we wanted, Australia didn't let us do that," he said.

"They have a good goalkeeper and four or five good defenders. Also, you have to consider the fatigue of your players.

"I'm convinced that we played better than our opposition before the sending-off and after the sending-off. We attacked from the sides as we had planned."