Directed by Hayao Miyazaki. Voices of Cate Blanchett, Matt Damon, Liam Neeson, Tina Fey, Frankie Jonas, Cloris Leachman, Lily Tomlin, Betty White G cert, gen release, 101 min

WHEN THE Oscar nominations were announced last week, the biggest surprise was, surely, the inclusion of Tomm Moore's lovely The Secret of Kellsin the shortlist for best animated feature. The Irish film grabbed the place many felt was reserved for the latest film by Japanese master Hayao Miyazaki. Here it is.

Following the incandescent Spirited Awayand the somewhat sluggish Howl's Moving Castle, Miyazaki has delivered something a little like a version of Hans Christian Andersen's T he Little Mermaid. It hardly needs to be said that Ponyo bears the same relation to Disney's (perfectly nifty) adaptation as a tricycle bears to a chrysanthemum. It's absurd, sentimental and somewhat confusing. But if you have even a sliver of inner child left in your psyche, you will be charmed out of your boots.

Ponyoconcerns a tiny fish-child amalgam who, as the film begins, lives in an undersea bubble with several dozen of her siblings. One day, defying the edicts of her tyrannical father – some class of nautical warlock – she ventures up to the shore and encounters a shy, rather lonely boy named Sôsuke. He calls her Ponyo and deposits her gently in his pail. Subsequently, the creature is summoned back to her father's lair, but, having tasted blood seeping from a wound in her new pal's flesh, begins to grow legs and to increase significantly in size.

Much has been made of the punch-up, carried out in Hollywood's virtual saloon bars, between digital animation and its hand-drawn predecessor. But the films of Miyazaki (and many of his compatriots) appear to occupy some discrete third medium. With its pale washes and, courtesy of the venerable Joe Hisaishi, its jaunty, melodic score, Ponyocaptures flavours of the infant sensibility that, for their brilliance, Disney's films rarely manage.

As ever with this director, certain elements of the film will slightly spook older viewers. Don’t Ponyo and her massed sisters seem a little bit like agitated sperm cells? Aren’t the intimations of ecological doom a little too close to fever dreams? Why do Hayao’s villains – all hair and capes – so often look like Rick Wakeman’s less stylish locum?

Children, by way of contrast, will laugh at what’s funny and only quake at what’s properly frightening. There’s a fair degree of both in this delightful entertainment. Good work, Mr Miyazaki.