You have to be allied with Magoichi after you go back to yagyu village and get t...

You have to be allied with Magoichi after you go back to yagyu village and get the ring the of Takijo he'll be standing by the rocks before you enter the cave just go up and talk to him after you get the ring and he'll give you the dynamite you then use that to blow up the rocks by the first dragon shrine to the left