The Gemara in Masechet Berachot (30; listen to audio recording for precise citation) comments that when a person in the Diaspora recites the Amida, he should face the direction of Eretz Yisrael while praying. Here in the United States we have grown accustomed to facing east during the Amida, but it is important to realize that we face east only because we are situated to the west of Eretz Yisrael. If a person would be somewhere east of Eretz Yisrael, then he would face west when he prays the Amida. This Halacha is codified in the Shulhan Aruch.
The question arises as to whether this applies only to the recitation of the Amida, or also to the recitation of Kaddish. For example, if somebody is reciting Kaddish in a cemetery by a family member’s grave, Heaven forbid, does he have to ensure to be facing the direction of Israel during the recitation?
Rabbenu Simha of Vitri (a student of Rashi), in his Mahzor Vitri (Siman 278), writes that after a burial, the mourner turns eastward and recites Kaddish (listen to audio recording for precise citation). Clearly, then, one must face toward Eretz Yisrael for the recitation of Kaddish. Indeed, the Zohar (Vayigash) discusses the name "Talpiyot" to which Eretz Yisrael is referred, and explains that this word means, "Tel She’kol Piyot Ponot Le’sham" – all mouths are directed towards it in prayer. The Zohar formulates this concept by noting that "all praises and supplications" are directed toward the Land of Israel. Meaning, we must face toward Israel not only when we pray, but also when we praise Hashem, referring to Kaddish, when we express praise for G-d’s greatness.
Accordingly, one must ensure when reciting Kaddish to face toward the Land of Israel, just as we do during the Amida. This Halacha is mentioned in the work Mehkereh Aretz (4:15; listen to audio recording for precise citation).
Summary: Just as one must face toward Eretz Yisrael during the Amida, one must likewise face that direction during the recitation of Kaddish.