And in even worse news for the New Zealand side, star player Sonny Bill Williams was forced off the pitch with an ankle injury two minutes into the second half - and was subsequently ruled out of the tournament.
Great Britain enjoyed an even better day, winning both their matches - a morning match against Kenya, and an evening game against Japan - to ensure progress out of the group stage.
The result was in the balance in the second of those matches until the very end: with the clock in the red Japan scored a try to put themselves within range of Britain, trailing 21-19, but the conversion was missed, leaving Britain's players relieved and delighted.
Fiji fans celebrate rugby sevens gold and first Olympic medal
As dramatic as that was, the match of the day had unquestionably been in the morning. In scenes reminiscent of Japan's memorable win over South Africa at last year's 15-a-side Rugby World Cup, the Japanese team kept fans on the edge of their seats as they beat New Zealand.
After taking an early lead they slipped 12-7 behind - but the All Blacks' missed conversion attempt on their second try proved crucial, with Japan touching down for a second score which they successfully converted to grab the lead.
Japan's Kameli Soejima scores a try in the men’s rugby sevens match between New Zealand and Japa
Image credit: AFP
They then made their way upfield from the restart and it seemed that they might score again as they had a line-out yards from the line.
Incredibly, however, they bungled the throw, going long and gifting the ball to their illustrious opponents with the clock in the red.
But some dogged defending saw Japan deny wave after wave of All Blacks attacks before they finally bundled the ball out of play to end the match.
Japan vs New Zealand Rio 2016
Image credit: AFP
New Zealand can still qualify for the quarter-finals from Pool C with two matches remaining, but the defeat will be a major blow to their confidence as they look to become the first men's rugby sevens Olympic champions.
Britain's team had no such problems as they managed a comfortable 31-7 victory against a much-fancied Kenya in their opening match on Tuesday.
Tom Mitchell led the side, who kicked off in the group stage of the competition in Rio hoping to improve on the GB women's team effort of a fourth-place finish, which they recorded after losing to Canada in Monday's bronze medal fixture.
Kenya, who won the recent Singapore Sevens and finished above England in the World Sevens series earlier this year, started poorly with GB taking a 17 point lead thanks to tries from Dan Norton, Phil Burgess and Daniel Bibby.
Scotsman Mark Bennett took the score to 24-0 just ahead of the break.
And after the break Kenya finally made it onto the scoreboard, but it was too little too late as Bibby scored a second try to end the game 31-7.
GB play Japan later on Tuesday and continue against New Zealand on Wednesday.
Watch Fiji go wild as men's rugby 7s deliver first gold and PM declares public holiday
Fiji thrash Great Britain to take gold - their first Olympic medal
Share this article