When displayed on a wall hanger
When the sword is displayed on a wall hanger the cutting edge should point upwards.
If the handle is to the left it shows the sword owner trusts you. He would have to cut left handed an unpractised move traditionally. Or turn the blade before drawing (very slow)
If the handle is to the right it shows that the sword owner distrust you and you are not welcome (a quick and effective draw is available to him at any time)
If the cutting edge of the blade is pointing down to the ground it tells you the sword owner knows nothing about Japanese swordsmanship
Passing the blade
When passing the blade to another the cutting edge should point to you and the handle is on your left. Both of your hands hold the saya (scabbard) in this manner it is impossible to draw the blade effectively. This shows your trust and respect to the person you pass the blade to because they can draw the blade quickly from this position. There are a few other ways to achieve this result but I will not go further here.
Now imagine you have done this in reverse so the blades cutting edge points to the other person and the handle is on your right this shows complete disrespect and no trust you can cut this person at anytime (I would take this as your cue to leave!!)
The use of Etiquette in ancient Japan
Do not think of it as etiquette but more as a code of survival.
Imagine you are in ancient Japan and a samurai enters your master’s house he had his right sleeve tied to his arm to prevent it flapping away. You allow him to enter you masters chamber to discuss business. Well you should be sacked. Because your master has been cut in two!
The right sleeve was tied back to allow quick drawing technique, which could be stopped by catching the butt of the handle in the sleeve. To this day new sword students are always doing this.
Lets rerun this example the samurai sits facing your master
(Assume no tied sleeve) he sits in sezia (kneeling posture) with feet side by side…….again you are fired it’s to easy for him to raise up and strike with a hidden weapon. You want him to sit with his big toes crossed he cannot rise on to one knee to strike with out first