As a matter of preference I prefer the term "youkai" because demon is too inaccurate for my tastes. Sadly a more accurate translation doesn't really sound good in English.

As a corollary, when I write I prefer to leave as much in English as possible and use Japanese words only for those terms that do not have a clear translations or unless it is awkward.

What about you guys?

I have to agree with you. I dont mind when writers use Japanese words when there is no English equivalent but throwing in phrases and words that do is annoying. I dont want to have to look at translations to figure out what has happened in the story. I have read stories that were rather good, but the writer used phrases in Japanese in their story that they didnt need to and it annoyed me. Things like Im sorry, are you ok, I love you, use English. Throwing in a different language doesnt make the story better. Dont use it if there is no need to.

I prefer youkai. I think the word demon has far too many connotations and images already attatched to it. While it might be the same for the word 'youkai' in Japan, to Japanese people, or Japanese speakers, I think a lot of us first related the word to 'demons' in the Inuyasha universe. At least that's how it was for me..
Also, youkai sounds a lot cooler. ;p

I've kinda jumped back and fourth... sometimes I use demon, other times I use youkai.

I somewhat prefer youkai though, though I hate when people call them "youkais" when talking in plural. In terms of phonetic pronunciation it's the same but the "s" on the end just messes with my head.

I also jump back and forth. If it is small words and phrases many are familiar with such as: miko (priestess), gomenasai (I'm sorry), hai (yes) and so on. However, if more uncommon words or phrases are in Japanese then I would appreciate a small glossary in the A/N.

I have to agree with SonofZhon and Avalei on this topic. I use youkai when I'm writing my stories, it just seems to flow better than the use of the word demon(s). I believe that using a mixture of two languages, unless it flows comfortably, and is used in relevance to the plot, throwing in random Japanese words just makes a mess and frustrates the reader.
That's my take anyway

Well it's sort of like using the term miko, or kimono.... I mean you could say priestess or dress, but you wouldn't be accurate. I think using certain foreign words, where appropriate really adds to a story. However, sometimes i've noticed less experienced writers fall into the trap of over killing it, which just makes it feel forced, and interrupts the story flow. It's an easy mistake, and a fine balance can be hard to maintain, but done right, I believe using the proper terms really helps enrich the story.

I don't really feel any aversion to using 'demon'. Even if it isn't a 100% accurate translation, it's understandable, especially in the context of our fandom. And since I use the word in this context, I don't feel any pre-existing connotations linked to the word 'demon' are a problem, since the readers know I'm using it to refer to a youkai.

I do use both words synonymously when I write, though, for variety's sake more than anything; it is a good way to avoid repetition. Other than this reason, I only use Japanese words when they don't have a translation - mostly words like kimono, tatami or seiza.

I suppose that my point of a view is different, though... Both because I'm writing in a foreign language to begin with, and because I'm majoring in Translation Studies.