The differences between 'fairy', 'elf' 'goblin' and 'demon' are not negligible. The fact that a dictionary offers you all of them, or that all have been used in different setting in the past, does not imply that all those words mean the same thing, but that in different situations or contexts, they can be used to describe a Yōsei. (That's the transliteration of the Japanese creature you wish to refer to, right?)
Let me reiterate that: in a certain subset of contexts, 'Yōsei' best translates as 'fairy'. In other contexts, it does not. In a certain subset of contexts, 'fairy' best translates as 'Yōsei'. In other contexts, it does not. Their semantic fields do not wholly overlap.
To find the right translation, you need to have a good understanding of the differences between the various possible terms in the target language - in your case, the difference between 'fairy', 'goblin', 'demon', 'elf', 'spirit', etc. Then, you can pick the word that best fits what you're trying to convey in your story.
Alternatively, you can use a transliteration - 'Yōsei'.
What are some considerations for or against using transliteration rather than an (inexact) translation?
- First, is your Yōsei a major story element, or something mentioned in passing? For something mentioned in passing, it makes less sense to go through the effort of transliterating, and demanding of the reader to learn what a Yōsei is. (You would have to provide the information - sending your readers to Wikipedia is a no-no. But learning is still a mental effort, a small distraction from the story.)
- How different is a Yōsei from whatever word you picked as translation? The greater the difference, the more reason to use transliteration.
- Who is your target audience? If you're writing for children, it's better to stick to familiar words.
- How strongly is your story localised? If your story is very explicitly set in Japan, if there are many other cues that set your story in a specific location, 'Yōsei' fits into the setting, while something as European as 'fairy' does so to a lesser extent.
One thing to remember, if you choose to transliterate rather than translate the term: your English-speaking readers are unlikely to be familiar with Yōsei. You'd have to provide them with the necessary information. This is preferably done by means of the story itself, but if that doesn't work, a footnote is an option. Footnotes are often used in translations, in similar situations, but if you're translating your own story, you can alter it a bit, to incorporate the necessary information into the text.