Hajime Moriyasu's Blue Samurai will now play either China or Iran in the semi-finals.
Takehiro Tomiyasu's first-half header was enough to seal it for Japan.
Moriyasu, who will also maintain his current assignment as the coach for Japan's under-21 team for the 2020 Tokyo Olympics, pledged to bring new blood to the top national side.
The 34-year-old defensive midfielder's departure from the Blue Samurai could mean a changing of the guard for the team, with former AC Milan striker Keisuke Honda, 32, also saying he plans to retire from the national squad.
Despite the heart-breaking loss, Japanese fans set a precedent for fans across the world by cleaning the stadium stands.
As dawn broke in Tokyo, Japan fans had dared to believe their team was about to make World Cup history.
Belgium coach Roberto Martinez said his side should accept they will be the underdogs in their World Cup quarter-final against star-studded Brazil on Friday.
Belgium poured forward and Nacer Chadli grabbed a dramatic winner.
FIFA World Cup 2018, Highlights, Belgium vs Japan: Belgium beat Japan 3-2, to play Brazil in quarter-finals
Japan have the spirit and mentality to reach the World Cup quarter-finals for the first time in their history, believes coach Akira Nishino.