Hello all, thank you for the responses,
I spoke to a Japanese colleague regarding the Z. and he wrote ""Usually 甲乙丙丁(4 grades or class) or 甲乙丙(3grades or class). So yea 乙 means the second in this context. Therefore could it be that this is: 2nd Class(grade) sword. ref: 354. or 2nd batch perhaps.""
He knows nothing about swords, but was just referencing the Z character. but could be an interesting take on it all. Although he wasnt very convinced it was a #5.
This matches to some extent what @SteveM mentions above in that this Z is just part of the production line reference.
Unfortunately my Grandfather is no longer around so unable to ask him how the NCO tassel got attached to the sword.
@Bruce Pennington the slider is leather.