ALI MOORE, PRESENTER: For over a thousand years Japanese swords have been sought after as both weapons of war and works of art.

A hand-crafted samurai sword takes many months to create and can sell for tens of thousands of dollars.

But there are fears that this ancient skill is dying out, with the number of swordsmiths in Japan more than halving in recent decades.

North Asia correspondent Mark Willacy reports.

MARK WILLACY, REPORTER: He's a master of an ancient yet lethal craft.

For more than 30 years, Genrokuro Matsunaga has been keeping the spirit of the Samurai alive, forging razor sharp blades of shimmering beauty.

MASTER MATSUNAGA, SWORD MAKER (Translation): People say how great I am to make these swords. But I'm not a great man, I'm merely keeping alive the skills my predecessors created.

MARK WILLACY: For more than 1,000 years Japanese swords have been regarded as both a weapon of war and a repository of this spirit.

To many they are also the embodiment of Japanese resilience.

This curved blade is more than 800 years old.

TETSUO KUROTAKI, SWORD CURATOR (Translation): I feel the Japanese sword symbolises how much our culture loves nature and lives with nature. You can feel its beauty in the sword.

MARK WILLACY: But this centuries-old craft is facing a modern problem, and that's attracting young people to keep this tradition alive.

Hammering, folding and quenching is hard, hot work. And it can take many years before an apprentice is good enough to start making a living.

MASTER MATSUNAGA (Translation): Several young people come to me every year hoping to become apprentices. But I wonder if they can make ends meet in this profession. When I started out there were 500 sword-makers. Now there is less than half that number.

TETSUO KUROTAKI (Translation): Apprentices need to learn sword-making with a master for four to five years. Then they have to pass tough tests set by the Culture Agency.

MARK WILLACY: To ensure the way of the sword is kept pure, traditional sword-smiths are only permitted to forge 24 blades a year. And while collectors see these swords as exquisite works of art, Master Matsunaga prefers his to be put to the test.

(Footage of swords being used)

Together with his fellow sword enthusiasts, Master Matsunaga has developed his own fighting style, based on the skill and the stealth of the Samurai.

Master Matsunaga's swords cost more than $15,000 and they take six months to craft. But it takes just a micro-second for one of them to slice through these soaked tatami mats, which are used to test blades because they have a similar consistency to flesh, sinews and bone.

MASTER MATSUNAGA (Translation): We should not forget the original purpose of the sword as a weapon. Learning to cut with a sword is important to understanding the art of making a sword.

MARK WILLACY: Master Matsunaga may have made a couple of concessions to modernity, for example employing a mechanical hammer, but this renowned sword-maker is determined his ancient craft will not die out like the Samurai who once wielded these blades with such lethal efficiency.

Mark Willacy, Lateline.