The full quote goes:
In the closing years of the Heian period in Japan, the noble class was paying the price for generations of introspection and for their failure to properly attend to administration. For years, they had focused on courtly intrigues and had cultivated pleasures at the expense of their government duties. The ministers of the Imperial Court had become so incompetent that by the year a.d. 1000, they no longer had the knowledge needed to issue new currency. The existing supply of coins gradually shrank, and much of Japan turned to barter economics.
At the same time, the security and prosperity of the Empire was suffering. Bandits wandered the countryside, making travel between settlements hazardous. Leaving home at night was considered a foolhardy act. Crops failed, or were simply not distributed to the hungry cities. Waves of famine and disease struck the Empire.
The game in question is the tabletop RPG Usagi Yojimbo, from 2006. On a semi-related note, I quite like this game and intend to play it, but if anyone could point me towards a better one for setting, that would be great! I'm not really after anything too indepth, it's more about the general feel and basic setting of the time period than serious studies.
Thanks anyway!
We know that in the mid-10th century, the government stopped minting coins. However, there's no reason to think that it's because they no longer knew how to make coins. Rather, they may well have realised that they were better off not using coins. Why? The answer lies in the early history of Japanese currency.
In early Japan, before the 7th century, the only coins in use were Chinese. These were valuable, and don't appear to have circulated widely or been in general use. A variety of valuable items were used as media of exchange; the most important was rice. In the 7th century, the use of coins increased, with Chinese coins in wider use, and domestic production of silver and copper coins being minted in Japan, conforming to the standard of the Chinese coins. The 7th century also saw the wars in Korea that resulted in unification under Silla in 668. Both Japan and Tang China were involved in these wars. Tang and Silla together were able to destroy Goguryeo, which covered northern Korea and a large part of neighbouring Manchuria - the Manchurian portion went to Tang, and the southern section (in modern North Korea) went to Silla. Japan had, to their misfortunate, backed one of the losing sides - allied with Baekje, they had fought Silla and Tang on land and at sea, and lost. (They might also have been involved in Gaya.) The winners - Silla and Tang - viewed Japan as an enemy; Japan, fearing invasion built fortifications in likely invasion spots. This turn of events reduced Japanese trade with Korea and China, and thus reduced the supply of Chinese coins.
In the early 8th century, the Japanese government began minting coins on a much larger scale than before, possibly in response to the reduced supply of Chinese coins. By the end of the century, the government had successfully debased the currency to the point of it being useless. Time for currency reform! The currency worked again, but after another 150 years, the coinage had been debased again, and were worth only 1/50 of what the equivalent coins had been worth after the currency reform. Supposedly copper coins were in fact effectively lead coins, and also smaller than had been.
The last coins issued for a long time were minted in 958; it's in the time after this that your RPG claims that "they no longer had the knowledge needed to issue new currency". However, another possible explanation is that after two cycles of rendering their own currency worthless through debasement (a) nobody trusted Japanese coinage any more, and (b) the government realised that it just wasn't working. Another possibility is that since both Tang and Silla had collapsed, and their successors, Song and Goryeo, were friendlier with Japan and much more willing to trade, Chinese coins became available again.
By the mid-12th century, Chinese coins were being imported in bulk, and were widely used, and this continued for centuries - one Chinese shipwreck off Korea sank with 27 tons of copper coins bound for Japan. There was still local production of coins (including by daimyo rather than the national government), nominally of equal value with the Chinese coins, but in practice worth much less. It was not until Hideyoshi's rule that large-scale minting began again.