Shinya Tsukamoto doesn't make very many films as a director. In 20+ years his portfolio totals only 15, but his only true slump came between 1989 and 1995. After his breakthrough film "Tetsuo: The Iron Man" (1989) he contributed two mediocre projects before rebounding with the excellent "Tokyo Fist" (1995). Subsequently, he's been very consistent in terms of quality, with no duds to speak of. However, "Vital" (2004) was his last truly great film. That is, before crafting "Nightmare Detective 2" (2008), which is basically about a dream traveler who tries to overcome his own nightmares while also helping a schoolgirl overcome hers.
What makes this film so good is Tsukamoto's admirable patience that completely eliminates jump scares as he opts instead to build tension thru long-lasting suspense sequences. I frequently compare this to the little known Japanese horror flick "Creepy Hide and Seek" (2009) because of its deliberate pacing and slow-burning tension. One of the most memorable scenes involves the lead actress who attempts to elude a psychotic schoolgirl who threatens to stab her with a sharp pen. Just imagine what this scene would look like . . . now scrap your preconceptions and watch how Tsukamoto does it! The entire sequence occurs with little to no dialogue and takes place within a claustrophobic apartment complex where the antagonist nightmarishly stalks the protagonist around corners and elevators. It's really a great series of events that should impress many viewers.
Another notable aspect of this film is the acting. Tsukamoto has extracted the best out of acclaimed actors like Tadanobu Asano and has also improved the performances of otherwise average actors like Tomorowo Taguchi, but dealing with the frequently inept Ryuhei Matsuda must have been one of his most difficult challenges. The first "Nightmare Detective" (2006) had decent performances despite Matsuda's typical overacting (in case you hadn't noticed, I'm no fan of his), but in "Nightmare Detective 2" something very improbable happened. All of a sudden, as if by magic, Matsuda became a good actor! I've seen a number of his films, and I kid you not, this is one of the few performances that I would categorize as "admirable" and/or "very good." The lead actress, Yui Miura, is also good here.
One big hurdle for viewers to overcome is the fact that this film is jam-packed with ambiguity from start to finish; while this may leave some viewers frustrated, it greatly accentuates the serrated structure of actual dreams and creates a hypnotic mood to boot. It's not as confusing as "Spider Forest" (2004) or "Marebito" (2004), but those who enjoy surrealism and ambiguity will likely take great pleasure in watching "Nightmare Detective 2." Those who need details explained will consequently have problems with this film.
Overall this was a very fine effort on the part of everyone involved. I would also recommend "Creepy Hide and Seek" (2009), "Carved 2" (2008), and "Tamami: The Baby's Curse" (2008) for recent Japanese horror goodness.