Xenoblade 2 has better characters and story than the first. Only people who don't like anime style graphich would say the contrary. The story of the first Xenoblade was over the top, and in my opinion, the 2 is better in everything.

So out of all the replies so far only 1-2 people actually think Octopath is a better game.
I think that settles the matter.

Xenoblade 2 by a landslide. Not even in the same ball park here...

In term of character development and romance things, Xenoblade 2 is league ahead. For example: Compare Rex at the beginning to Rex at the ending of the game and the relationship of Rex and Pyra.

I guess I'm not all that interested in changing your opinion, but I personally found the story to be on par with XC1, and liked the cast even more than the first. Rex's character development in particular was amazing, watching him go from a cocky naive kid into a true hero was amazing. I get chills whenever watch the climax in Chapter 7. When Pyra and Mythra ask if he is able to harness their power, and instead of answering yes, he simply asks: Do you love this world? He's not thinking about himself anymore, he fully realizes what means to be their partner. I could make similar comments about the rest of the cast, particularly Nia and Zeke...heck even the Nopon mascot had his own character arc. The story twists towards the end of the game floored me on top of that, particularly because I enjoyed the first game so much. 

If the game didn't make an impact on you the same way, no worries...but XC2 is definitely my favorite of the three XC games, and the awesome cast is the primary reason for that.

I really like Octopath but XC2 (base package not even including the best expansion/season pass in the industry) is by far the better JRPG experience unless you are a die hard for turn based combat or have a problem with the art style.

It depends. The way I see it: Xenoblade Chronicles 2 New Game+ > Torna > Xenoblade Chronicles 2 first play.

Part of the issue with the first playthrough is that the beginning feels very rough due to missing so many field skills and difficulty spikes; also the pacing is kind of terrible. Torna and New Game+ are excellently paced. Torna's pacing and length feel a bit like an SNES RPG, it's a lot shorter.

I realize this is controversial, but I actually liked Xenoblade Chronicles X even more. The game felt grander, and the story more interesting - despite not having a traditional plot line, and is instead more like a large collection of short stories that fill out the overall universe instead - think Asimov style, like iRobot or Foundation; or even Robert E Howard.