City — it sits in quite nice area (5)
I believe the answer is:
osaka
'city' is the definition.
(Japanese city)
'it sits in quite nice area' is the wordplay.
'it' becomes 'sa' (old-fashioned abbreviation for sex appeal).
'sits in' is an insertion indicator.
'quite nice' becomes 'OK' (OK can mean fairly good or nice).
'area' becomes 'a' (maths abbreviation).
'sa' inserted into 'ok' is 'osak'.
'osak'+'a'='OSAKA'
(Other definitions for osaka that I've seen before include "Third largest city in Japan" , "Japanese metropolis" , "Asian" , "Port city on Honshu, Japan" , "Port city of southern Honshu" .)