The following is from the manga InuYasha Vol. 1
A Little History:
The Sengoku Jidai
InuYasha takes place in the Sengoku Jidai, approximately 1482-1558, also called the “Warlord Era,” or “Era of the Warring States.” The time period got its name from the constant civil wars that took place throughout Japan’s 15th and 16th-centuries. The reasons for these conflicts were mostly economic. Feudal overlords, or daimyo, became increasingly powerful and wealthy, while the ruling shogun and his central government weakened. Regional daimyo fought among themselves for control of the land and its resources. Average working folk were mostly concerned with keeping their heads down and not ending up in the middle of the next great battlefield. It was an age of great battles, powerful samurai and mysterious ninja. With this as a backdrop, it's not hard to see why so much Japanese fiction takes place around this time. Many of the Akira Kurosawa's films, Stan Sakai's comic Usagi Yojimbo (based loosely on the tales of Miyomoto Musashi), Kazuo Koike and Goseki Kojima's samurai classic Lone Wolf and Cub and many others are set in this time period.
In a 2001 interview with Animerica magazine, Takahashi gave her reason for setting the story of InuYasha during the Sengoku Jidai as because it was "relatively easier to draw out a ghost story from that time period...In the Sengoku Era, there was war, and lots of people died."
Additionally, the subtitle for the InuYasha anime series, Sengoku o-Togi Zoshi, is a reference to a specific kind of popular pulp stories written during this tumultuous period.