That is true. The same reason why mediaval swords used a similar process, not folding but twisting the steel. The reason are impurities in the ore deposits. Japans deposits have more of them than e.g. European ones. Which kind of enabled more advanced metalurgy in Europe, ultimately leading to stuff like spring steel.

The folding and reforging reomves these impurities from the steel and changes the carbon content, making the stell more flexible or harder and thus sharper but also more brittle. Quite ingenious, if you aske me. Nowadays, Japanese deposits can be exploited with electromagnets, resulting in basically pure iron ore making all that metalurgy more or less unnecessary.

Not that Japanese swords were bad, they were as good as any other sword in killing people. So no katana superiority, but neither any deficiencies compared to European swords.

Also be aware that swords used to be the medival equivalent of modern day pistols. More or less.