Before I get into my reply, a disclaimer: I don't think it's wrong with "sexy". There's a time, place, and market for it. I might sound a bit salty though because I'm fed up with sexualized and submissive female characters. Also, possibly NSFW pictures below.
I think @wotcomic nailed it: Does the character want to be sexy right now? And who are you trying to turn on?
Using Fairy Tail as an example because you mentioned it: It's because the answer to those questions were "no" and "the reader" respectively pretty much all the time in Fairy Tail I stopped reading it. (That, and the writing in general.) I don't mind a character trying to seduce another character, or dressing sexily if that's their personality. However, I do mind when it gets in the way of the story and it doesn't make sense within the narrative. (Talking about story-driven non-porn stories here.) Here, let me show you what I mean:
They're discussing the end of the world-level stuff here, and yet Erza looks like she's in the middle of something much more carnal in nature. She's blushing, eyes half closed, sweating and wet all over, we're given a low perspective on her that is pretty much designed to make it look like she's submissively lying on a bed and we're in a dominant position over her. You need literally no imagination at all to turn this into head porn. You could paste in some sheets in the BG around her and voilà. The only thing in that frame "preventing" it from being a shot from erotica is Natsu talking about "serious issues".
As I said, there's nothing wrong with "sexy". There are also readers who like this (obviously, looking at Fairy Tail's success). But you need to be aware of some things if this is the route you want to go.
- You're dumbing the story down. If you're trying to bring a serious mood and subject across, it's not helping you setting a serious tone when everyone is hardcore camera-flirting (and all the characters pretending not to see that everyone else is in an oddly contorted flirty pose -> breaking the in-universe logic).
- You run the risk of alienating many readers, for several reasons. One being that not everyone feels like they need or want softcore porn on every page to keep them reading, they want more story instead. Or they're more into subtle relationship stuff next to the story. Basically, sex is a strong factor, both in terms of attracting and repelling. It's like selling a product: Know your market. Also: the market is a strategic choice made by you. Then there's the next big issue:
- You run the risk of being sexist. As pointed out already in this thread, the object of sexualization is almost always girls and women. Try the Hawkeye initative with the above picture, put Natsu in that pose and perspective, with that expression and equally wet. If you're not used to this thought experiment, you might feel a bit alienated, or at least a bit strange. That's what many girls might feel seeing the female characters they admire or even identify with in such poses (it's definitely what I feel). If the author first wants you to identify with the character, and then turns the character into a sex object... It's off-putting. I never feel taken seriously or respected as a part of the audience if only the girls, and especially all the girls in the show are "sexified", and I'm likely to drop it very soon. Imagine if Natsu had been turned into submissive eye-candy by the author. I wonder what would happen...
To reinforce the point of men and women often receiving different treatments in this regard, here is the page showing the most of Natsu while he's the one getting a backrub. As you can see, Natsu is not portrayed anywhere close to that mental image I tried to make you see in the little thought experiment under point 3. xD Just a comedic face, no invitational looks or suggestive poses. A flat-on perspective of him looking relaxed and confident is what we get (with Erza strategically sitting next to him) The whole back-scrubbing setup is just to make Erza into eye-candy. Even that weird broccoli-head gets to look confident and strong in the bath. Why not Erza? (Hint: Girls are not the intended target audience.)
Another example of sexualization vs. sexy, something that absolutely grinds my gears if I'm honest, is shy female characters wearing skimpy outfits and then constantly go "oh nooo my skirt is so shooort don't looook ///////". If you're shy and conscious about your body, you cover up. You wear baggy clothes. You make sure that there's no way you'd accidentally flash someone. This is a problem of fanservice interfering with the story's logic. Or in other words, the male gaze instead of the character's personality dictating a character's choices.
Again, it's something you can do in your works if you want to. It just won't be good writing, and you will target a specific audience with it.