I went to see a Japanese sword smith at work when I lived in Japan.

As Guest Petr said it is flded many time. A plate of iron with a tang is covered with a layer of carbonised wood and other ingrediants (each sword maker has his own secret mix). The plate is then heated in a small forge, it is then taken out and spilt lengthwise down the middle and hammered over. The carbon goes into the iron. Back into the furnace and then heated and split again, sometimes the splitting is done length wise sometimes across. The carbon gets driven into the iron to form steel layers.

As the process goes on the sword bar is drawn out and gradually shaped. the final stage of forgeing is to cover the sword with a layer of clay mixed with other ingrediants. Where the cutting edge is going to be it is scraped off to expose the edge. Often the smith will make a particular pattern which is destinctive to his work.

The sword is again returned to the forge, the smith watches and judges the timing carefully. It goes into the forge with what will be the cutting edge exposed to the hot coals. Once he has judged the time (again their trade secret)it is quickly taken out and quenched. This is what produces the hardened tempered edge.

Some Japanese sword smiths pass the sword onto a polisher, some do it themselves, but the process starts with rough blocks of stone and graudalu works down to very fine stones. The polishing reveals the grain of the metal and where the smith covered and exposed the cutting edge the hamon is revealed. Experts can look at the hamon's pattern and the curve of the blade (this is called it's sori) and name the area and smithy where it was made.

Once the polishing is doen it's tang is often engraved with the smiths name. The last stage is the fitting of the swords with the destinctive bound handle (which is held by either one or two bamboo pegs) the tsuba (hand guard) and a scabbard (saya) is then made to complete the sword.

Japanese swords attract high prices now, even the standard WWII shingunto.

A sword can be repolished and sharpended thoughout its life. The blade is never touched woth bare fingers or if it is then it is cleaned with soft tissue or cloth and a smear of clove oil is put back on.

There are only about 5 very good (termed National Living Treasures) smiths left in Japan today.

Most of the modern day katana you see in shops are cast alloy blades and the balance and quality is often poor.

My kendo teacher when I lived in Japan managed to break one of these during a demonstration of sword drawing ( termed Iaido) just by doing a very fast draw. The peg (mekugi) broke and the sword parted company with the handle. He blamed himself for using a poor quality blade and for not checking the mekugi was sound.