The result leaves the Samurai Blue just one point above both Saudi Arabia and the Socceroos, with all teams having played eight matches.
Japan are now on 17 points with a goal difference of +9, while the Saudis (+7) and the Socceroos (+6) are on 16.
Yuya Osaka scored a header early in the match in Tehran, where Iraq plays its home games for security reasons but Mahdi Kamel equalised in the second half for Iraq, which has already been eliminated from qualifying.
Japan will host the Socceroos in August and then play in Saudi Arabia in September.
Also in Group B action Ali Mabkhout scored an injury-time goal to give the United Arab Emirates a 1-1 draw against Thailand.
Thailand, which is in last place in Group B, got its goal from Mongkol Kraisorn – the draw effectively ends the UAE’s campaign to make their first World Cup since 1990 and second ever.
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