The latest film from the veteran Japanese animator Hayao Miyazaki was a major phenomenon in Japan even before it received its European premiere at the Venice Film Festival. The long-awaited follow-up to Spirited Away and Howl’s Moving Castle has already taken over 10 billion yen at the box office, which translates to over 8.43 million tickets sold in just over a month on release, promising a final figure which seems likely to break records by the end of its run.

It’s a testament to the esteem in which the 67-year-old Miyazaki is held (frequently described as the greatest living animator, he is cited by Pixar creative head John Lasseter as a major influence) that the film screens in competition at Venice despite the fact that it is not a world premiere. And at the press screening I attended, the audience reception was the warmest of any film yet in the festival.

A gentler, younger film than Miyazaki’s recent masterpieces, Ponyo On The Cliff By The Sea is loosely inspired by Hans Christian Andersen’s " A Little Mermaid " , transposing the story to a gorgeously realised contemporary Japan and replacing the mermaid with a bolshy little goldfish who decides that she wants to be human after she is rescued by a five-year-old boy called Sosuke.

All of Miyazaki’s films have their own blithe disregard for narrative logic, but Ponyo is as chaotic and exuberant as a story told by a hyperactive toddler who has just been mainlining Fruit Shoots (…and then a whale did come and it did turn into a wave. And then they did eat noodles…). The rich symbolism and the shadowy frisson of threat in, say, Spirited Away is more or less absent from this film. There is a creepy underwater sorcerer who tries to keep Ponyo the goldfish in his underwater lair, but the sum total of his evil-doing is an injudicious over-application of blue eye shadow and the fact that he once shoots his bubble gun at a passing squid.

Sparsely populated by Miyazaki’s usual standards – rather than armies of soot sprites and water spirits – the film concentrates on family, specifically the relationship between mother and child. Ultimately, the defining feature of this film is its weapons-grade cuteness. It’s utterly disarming, a film that unspools like a big sigh of pleasure. Ponyo in her human form, joyfully careering around on her newly sprouted legs, is a delight.

Like most animations set, partially at least, in the sea, there is a vague environmental message to " Ponyo " , although a veil is drawn over Japan’s more dubious maritime activities. In Ponyo’s ocean, whales and dolphins swim unmolested, along with ‘ancient fish from the Devonian age’ – a detail that would seem utterly bizarre and puzzling were it not for the fact that in Miyazaki’s richly imagined worlds anything goes, even prehistoric fish.

Editor's choice

• The 100 Best Films of the Decade
• 70 facts you didn't know about Marvel
• The 50 Biggest Movies Of 2010