The classy and sporty option for the Corolla, Sunny users has always been the Civic. Aided by the uber cool Type-R and the somewhat simmered down but yet sporty SiR the Civic has always captured the hearts of motorist. The local motorist here also got access to the JDM only RS version which was a standard Civic with a bit more sporty suspension and external kit which though disappeared after the 7th generation Civic. The current (8th) generation Civic had such a futuristic design that it had Toyota delaying the launch of the Corolla to do some design tweaks, though that hardly made a difference as the Civic was a class on its own on the visual impact.
However it seems that in its homeland the Civic has been loosing out, not to competitors but to its own siblings, and based on the reports the nearly similar sized Honda Fit, and the Civic based Stream being the major causes.
However the Civic model will live on, as it still is a very popular car in other markets, and the new (9th) generation will be produced in the new Honda plant in Argentina. The question remains though is what will happen to the highly acclaimed Type-R sedan. While the European arm of Honda will surely develop a new Type-R hatch, the Japanese division were always one step ahead with an even more sharper and sporty sedan version. Hopefully Honda will retain a team to make this car and keep the sporty Civic sedan image alive.
The links on this are many – one for instance http://www.dailytech.com/Report+Honda+Civic+Getting+Kicked+Out+of+Japan/article20165.htm