Youkai, from what I understand, are just supernatural Japanese spirits, who can range from being minor inconveniences to causing disasters.

On the other hand, demons are universally reviled and considered to be the types of monsters that go around causing massive amounts of havoc.

Because they're all weebs, they call the demons that roam the Crimson Sky 'Youkai', even though straight up calling the demons 'demons' would make more sense, in regards to the connotations attached to the words. XD

Of course, if the GM has another explanation for this, whatever then. All I have to go off of is the first post of the Int Chek.