When I first had the idea of a Miyazaki Hayao retrospective, one of my biggest reasons for wanting to do it was that it would give me a plausible reason to see his 1988 feature My Neighbor Totoro, which I had, unthinkably, never watched until two days ago. Not that I should have needed a "plausible reason" to watch a movie that has been praised to the heavens by pretty much every single person who has ever seen it, but that's the way it goes.

If the praise of other animation buffs hadn't been enough to reassure me that I was in for a treat, then the poster would have done the trick. Go ahead, look at it, up close.

That poster is one of the sweetest and cutest bits of movie advertising ever, I deem: and it all comes down to the way that the big grey creature - a Totoro - is sheltering from the rain with a leaf that doesn't remotely cover his whole head. The same image appears in the film proper, where the different composition (and the noticeably fatter Totoro) makes the image even cuter, if that's possible. The size disparity between the girl and the creature is maintained, but the lack of space above the Totoro's head emphasises his shape more, the extra space to the girl's right (our left) emphasises his roundness, and the slight redesign of the character makes his eyes much more appealing.

But all this theoretically puffery aside, I think it's probably much easier to explain: the Totoro is big and fluffy, he has no visible mouth, and he is behaving very simply and seriously (stay dry), but doing it in charmingly incompetent, silly way. "Cute", "silly", "charming", "sweet": these are the key words to describe My Neighbor Totoro. Even the word "Totoro" is derived in the cutest possible way; it's how a four-year-old mispronounces "tororu", the Japanese word for "troll".

When it was new, My Neighbor Totoro was a work without precedent in Miyazak's canon. After three features, and healthy portions of three television series, certain recurring elements had definitely established themselves (primarily in the three projects over which the director exercised an especially strong hand): a post-apocalyptic "used future" setting; the loving depiction of flight; a heavy thematic emphasis on the uncomfortable relationship between technology and machinery on the one hand, and the balance of the natural world on the other, with the post-technological human protagonists caught in between; central female characters who are somehow tapped into mystical energy; a central male-female relationship that is based on mutual respect and friendship rather than romantic feelings, that nevertheless hews closely to traditional gender roles (man=protector, woman=morally pure). There are hints of some of these things in Totoro, but hints only. This is instead a resolutely domestic story about a family living in a world not recognisably different from our own - Miyazaki has identified the setting as 1955, and in-film evidence tells us that it's August in the then-farming community of Tokorozawa, but it could take place anywhere that there's a big old house next to a sprawling forest just begging for children to lose themselves in its shade for a long summer day.

It is the story of the Kusakabe sisters: eight-year-old Satsuki (Hidaka Noriko) and four-year-old Mei (Sakamoto Chika). They and their father (Itoi Shigesato) have just moved to the country from Tokyo, to be nearer to the hospital where the girl's mother (Shimamoto Sumi) is being treated for a grave illness (tuberculosis, by implication). While playing one day, Mei spots a peculiar white creature, the size of a rabbit, that leads her to a tunnel through the underbrush, and on the other side of this tunnel she finds a cave that is home to a large grey creature (Takagi Hitoshi) of the same shape as the white one: these, as well as the medium blue one, are the Totoros, the guardian spirits of the forest. The Totoros introduce the girls to a small world of magical beings, and as the Kusakabes settle into their new life, Satsuki and Mei are led to an ever-deeper understanding of the wonders of life around them.

Here's another word to describe the film: delightful. Not in the sense that it is a delight for the viewer - although it is - but that the primary emotion expressed within the film is delight. My Neighbor Totoro is not a movie which does not know fear, but the fear within it is personal and specific: the fear of a young child who is faced with the possible loss of a parent. It emphatically lacks a fear of the otherworldly and the mysterious: Satsuki and Mei are first and above all thrilled to find that their new home is inhabited by strange black creatures called (in the English translation) soot devils. And Mei's first response to finding this huge sleeping creature is not trepidation, but unbridled enthusiasm.

This is one of the gentlest films I have ever seen about children meeting fantastic creatures. That Satsuki or Mei is ever in any danger is quite unthinkable - even when Mei goes missing, we can only question when, not if, the Totoros will use their powers to help her. Even the expected genre boilerplate in which the sensible parent disbelieves his children's fabulous tales is absent: both Kusakabe parents are excited at the idea of living in a haunted house, and the girls' father responds to their stories of the Totoros with guileless acceptance that what they say is true. Nor do we have the impression that he's just humoring them and letting their imaginations run free, as one might expect; for that would require the film to drift, even for a moment, to share his point of view, and except for scenes that are absolutely required for the plot to keep working, My Neighbor Totoro never abandons Satsuki and Mei's perspectives. If they would not notice something, or pick up on subtext, then neither do we. This strict adherence to a child's view of the story is vanishingly rare, which is part of what makes Totoro such a magnificent children's movie: it treats its audience with unstinting respect, validating their understanding of the world in a way that even a childhood-worshiping director like Steven Spielberg has never come close to replicating.

Visually, the film (designed by Oga Kazuo, soon to be a semi-regular Miyazaki collaborator) has the same gentleness of its narrative. I complained - or maybe, "observed with reservations" is a better way of putting it - that Laputa: Castle in the Sky was not as rich to look at as Nausicaä of the Valley of the Wind, and Totoro is softer and more pastel yet. Described by Studio Ghibli's top producer Suzuki Toshio as "nature painted with translucent colors", there is a watercolor dreaminess to both the locations and the characters.

If this were a Disney Studios feature, I would call this a storybook aesthetic. But that is not at all the feeling of My Neighbor Totoro - I would rather like to say that its overwhelming pastel softness is the look of childhood placidity. It lacks the brash colors of Miyazaki's earlier films - and some of his later ones - for the same reason it lacks the ambitious, conflict-driven narratives. It is a soft, approachable film, about simple, peaceful emotions and characters. That may sound unambitious, but it is the most ambitious thing of all: telling a story that is rich in human experience at the most primal level of understanding, and doing it without reliance on any kind of dramatic tension or external threat. That Miyazaki was able to accomplish this so successfully makes Totoro an unmitigated triumph of family cinema, and perhaps the masterpiece of the director's estimable career.

In 1988, the high cost of the film made it something of a huge gamble for the still-young Studio Ghibli (perhaps its slight running time - at 86 minutes, it's Miyazaki's shortest feature by far), and they released it as a double feature with Takahata Isao's Grave of the Fireflies, hoping that the gravitas of the latter film would increase the chances that the untested idea of children and friendly monsters in the countryside might actually pull in some box office (perhaps also, Totoro was meant to offset the incredibly depressing Grave, as manifestly un-delightful as its sibling is euphorically happy). The double feature ended up losing money, in the short term, though both films have since gained well-deserved sterling reputations; and in the end, the big Totoro became Studio Ghibli's official mascot. A fitting fate for a movie that sums up so much of what Ghibli is about: sincere, rich family entertainment, that uses the medium of animation to its fullest range of possibilities. If the studio, and the filmmaker, had never done anything else than this feature, their impressive reputations would still be fully deserved.