This question is often asked when one finds out that all the blunt training swords in Japan are made from a zinc aluminum alloy. However to fully answer this question we need to first explain why this is the Japanese material of choice.
The Japanese sword laws are rather complicated and are both designed to preserve the art as well as to regulate the (antique) sword industry.
Rule number one is that it is ONLY allowed to create steel (magnetic) swords if you are officially registered as a Japanese sword smith. Additionally, sword smiths are only allowed to make two swords per month (or 24 per year) to prevent mass production.
These sword MUST qualify as nihonto, which means that they should be made of Tamahagane (traditional steel) or orishigane (gathered steel), should be folded and have the well-known nihonto features such as the hamon and the Japanese curvature. Steel swords that resemble Nihonto are strictly forbidden and only traditionally made Japanese swords are granted an owners permit.
Zinc aluminum iaito are an easy and cost efficient way to get around this law. The alloy isn't magnetic and can produce more or less a similar outcome. Also the material is very easy to work with due to its softness. Unfortunately it also as a lot of down sides such as a shorter life span (metal uniqueness), higher flexibility and lower pulling strength.
It's a safe assumption to say that steel swords are better, stronger and more like the traditional Japanese sword. Would the Japanese make iaito from steel should this be allowed? Of course yes!
In the rest of the world we are not restricted to use non-magnetic materials. This means that we can create swords that much more resemble the actual Japanese sword than Japanese iaito manufacturers.
Hardened steel swords can be made thinner and better balanced than zinc/alu swords and they will surely feel completely different from each other. Needless to say, an aluminum alloy will never be as strong and rigid as a steel alloy. Due to the lesser rigidity, a zinc aluminum sword has a stronger wobbling movement with your strike which heavily affects your tachikaze and ken-tai-ichi.
* A side note is that due to the current sword laws, it is NOT allowed to bring your non-Japanese steel shinken or iaito to Japan (for training). Swords will be checked at the customs for a magnetic reaction and seized & destroyed when you cannot show an import license and Japanese ownership papers.