Three-times champions Japan, who won the shootout 3-0, will play the winners of Tuesday's second semi-final between Uzbekistan and Australia at the Khalifa Stadium in Saturday's showpiece.
Yasuyuki Konno scored the winning penalty on his 28th birthday after Koo Ja-cheol and Lee Yong-rae had their efforts saved by Kawashima, who had been criticised earlier in the tournament for some errors, and Hong Jeong-ho blasted wide.
"I told him a few days ago (Kawashima) that I trusted him and I told him again today and he did better than I even expected," Japan's Italian coach Alberto Zaccheroni told reporters.
An eye-catching move in the 17th minute set Yuto Nagatomo clear down the left and the full-back's cross found Shinji Okazaki but his powerful header was deflected onto the inside of the post by keeper Jung Sung-ryong who then gathered the ball.
Despite the Blue Samurai's fast start it was Korea who took the lead five minutes later from the penalty spot in somewhat fortunate circumstances.
Extra-time looked to have provided a winner when Japanese substitute Hajime Hosogai powered home the rebound after Jung had saved Honda's poor penalty in the 97th minute.
"I believe as human being referees can make mistakes, it was strange when referee pointed to outside of area but assistant pointed inside, but it is part of the game," Korean coach Cho Kwang-rae said.
