Yeah, Japanese steel wasn’t great, but they were working with what they had available at the time. Katanas were basically made out of iron dust, which had been melted into slag by filtering through charcoal. The resulting chunks of steel were basically straight up slag, not nice even ingots. So the steel they got was actually extremely high carbon in places, but that also meant it was brittle as hell, because those carbon pockets were prone to shattering.

So the folding was invented, to even out the steel’s carbon content (just like how a Damascus steel blade has visible stripes, Japanese steel had invisible stripes of high and low carbon steel) and to lower the carbon content overall; Every time you heat for another fold, you’re evaporating some carbon. So the folding process took the steel from extremely high carbon pockets to a more evenly distributed carbon content.

Now that modern steel processing exists, the only real reason to stick to the folding method is tradition. There’s no need to fold modern steel ingots because they’re already homogenous and can be produced at whatever carbon level you want.

According to whom?

The reason why Japanese iron is inferior is because of the source of the iron itself, they utilized iron sand instead of rock ore. Rock ore can be made up to 90% ferrous material while the iron sand contains as little as 2%.

This means when you smelt your source material into blooms of iron and slag, the blooms made from sand iron were much smaller. Instead of utilizing a single bloom to make a sword, the Japanese had to work several blooms together. Which is much more labour intensive, and can lead to a lot of imperfections in the final product.

This is why katanas were made out of so little material, and had to be handled with care. They were much more fragile pieces than similar swords made in Korea and China at the time.

Plus, the Japanese developed their iron working much later than their mainland contemporaries, as they never independently invented furnace technology. The technology for furnaces was imported, most likely from the Korean peninsula.

Katana's are weak on the flat side. They aren't really meant to be used for parrying. In fact, most sword fights in Japan would be over after the first or second swing. It was commonplace to hold the grip of a katana but not draw it in such a way so that your enemy has trouble judging how long your katana is and what is a safe distance to be from you. Once your opponent is in range, draw it quickly and kill them in one blow, ideally.

The act of killing your opponent in a single blow is called "nukitsuke" from "nukiuchi" meaning "to cut down an opponent" and "tsuke" meaning "to stop an opponent's attack before it begins".

The Sekiro and popular media image of extended katana fights didn't really happen, but if they did, there would almost certainly be some broken katanas.

I'm not into swords at all but I imagine it's a lot easier to rake the edge of the blade across a surface if it's angled away like a scimitar and more likely to just thwap something perpendicularly with a straight blade. 'Papercut theory' of sorts