318i makes roughly the same power as your typical 2-liter compact. What it does have over the Jap sedans is a better tranny, and a much more solid ride. I guess the sportier compact sedans (Mz3, Lancer EX, etc) could probably match its nimbleness by now, but the feel of going at speed in a German car is still a rather unique experience.

Of course, if you can afford it, go for the 325i so that you've got bags of power.