Disclaimer: I do not own Inuyasha. How I tire of writing this.
The True Sengoku Jidai
Many have questioned why there is a marked absence of demons in the year 1997, Kagome's time, when there are an abundance in Inuyasha's. The answer is brutally simple.
Humans.
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Humans were running amok, destroying youkai with their new, confidence-inducing weapons. Iron traps. Long muskets that shot lethal pellets, destroying lesser youkai instantly. If the youkai didn't die immediately, they were shot with a miko's bullet – a bullet infused with holy power.
The lands were in chaos.
The humans had not realized just how symbiotically they lived with the youkai, even if the majority were mortal enemies.
The 'gods' of the lakes, mountains, forests, and oceans that protected the humans from terrible misfortunes – they were youkai. Each and every one of them. Kindly youkai with a penchant for protecting the little people.
For a price, of course.
A little food and some garments now and then would be nice.
The 'gods' and the lords protected the inhabitants of their lands to an extent. A little rampaging here and there by youkai could slip by them. In return for tolerating the demon slayers, you know?
If any demons got out of hand, one of the minor lords either set out to kill them or sent word to a traveling team of fighters or slayers like the taijiya.
Life had been good, albeit slightly strained from an attack now and then.
Then the Europeans came. Bearing iron weapons and plate armor that revolutionized the warring of humans and the slaying of demons. Great western missionaries came through, proclaiming that since demons are cruel and shouldn't exist, they should all be killed. Normally, the humans would shy away from such an idea because of their power, but with the new weapons, they just might succeed!
The only demons strong enough to deflect or evade the humans new attacks were the cardinal and minor lords – and the occasional errant youkai with enough power.
It was a slaughter.
As time went on, more and more of the surviving demons were brutally killed. The strongholds of the lords were taken over by greedy humans with large armies. Not even the cardinal lords – of the North, East, South, and West – could resist the onslaught. Their vassals and defenders long dead, their offspring and mates murdered or imprisoned in cells and bound by bonds of reiki. They themselves were driven out, reduced to hiding in lonely forests or forbidden mountains where the humans couldn't find them.
The true Sengoku Jidai.