You'll want to go left and come back, to get behind the house. Once you get the Axe, you can also make a small shortcut between the paths by cutting down the small tree.
Go left to progress.
ENEMIES:
Flame Wraith: Two Fluffy Bats, two Flame Wraiths, and one Flame Sprite (one of the two that must be cleared to progress)
Brown Bear: Two Tanuki Dogs and one Brown Bear (one of the two that must be cleared to progress)
Dark Bush: Two Furry Slimes, two Dark Bushes, and one Brown Bear (guards Chest #3)
In non-Steam versions of the game, has Red Bushes instead of Dark Bushes, while the overworld icon is the same.
Prior to the Battle Mountain update, it had Dark Bushes instead of Furry Slimes.
Eyeball: Three Obsidian Idols and two Eyeballs (guards Chest #4)
