Games have been attempting to make us feel like we're exploring a living cartoon for a large part of the medium's history, and some have achieved spectacular results. The Wind Waker-style Zeldas seem more suited to their expressive, beguilingly childish look with every instalment. Level-5's colourful, lively worlds are often bursting with animated verve, whether in Dragon Quest and Rogue Galaxy's animé cel-shading or Professor Layton's more laid-back but equally distinctive style.

But collaboration with Studio Ghibli, the great powerhouse of Japanese animation, has taken the developer's already strong talent to a new level. You walk around in Ni no Kuni's world with the same air of wide-eyed amazement as the game's young protagonist, staring in astonishment at this beautiful alternate reality as a makeshift red cape billows around his narrow shoulders.

Ni no Kuni shares its overarching theme of childhood escapism with the studio's most famous films, Tonari no Totoro (My Neighbour Totoro) and Sen to Chihiro no Kamikakushi (Spirited Away). Its premise is heartbreaking; 13 year-old Oliver is devastated by the sudden loss of his mother, and upon crying into a stuffed animal that she made for him, it comes to life, revealing itself to be a magical creature that leads him to a parallel world.

It's worth pointing out that everything we know about Ni no Kuni's story we've learned from the trailers on Level-5's Tokyo Game Show stand and the demo itself. It's not clear which information relates to the DS version and which to the PS3's, whether they share the bulk of their story or diverge quickly in entirely different directions.

The PS3 on show at TGS demo offered two short scenarios to illustrate this lovingly-crafted new JRPG  a walk through a gorgeously rendered forest dotted with imaginative creatures, designed to demonstrate the battle system, and a short town quest where Oliver and Shizuku, an agitated little fellow who looks like a miniature Drowzee with a lantern hanging from his snout, must earn an audience with a king. The second gives a more rounded impression of what the game will actually be like when it arrives sometime next year.

It starts out in the overworld  a gorgeous, lushly colourful sprawl of green with windmills, copses of woodland, misty waterfalls and hills draped in drifting fog. Miniature towns and wildlife dot the map and Oliver runs around it as part of the landscape. The look and music are classic Ghibli  natural, imaginative and colourful.

If you run into an enemy the screen fades out to a battle scene; you have to make an effort to put yourself in a creature's path. They aren't placed directly in your way, nor do they come looking for a fight. In battle, you control creatures called Imagines rather than Oliver himself  these are the little stuffed demons in the fight scenes from the trailer.

It's possible to switch to Oliver with the shoulder buttons, but he doesn't fight well or do much damage when he attacks. What we've seen suggests that every character in the game has their own Imagine creature to fight for them. Different actions  attack, guard, special attack  appear in speech bubbles to the left of the screen, and Oliver shouts out the commands.