It's true that sequels are often a poor echo of the original film, and I was expecting as much from the Grudge 2. But I have to disagree on this one - I thought the level of suspense and terror was as high, if not higher than the first Grudge film - this had our nerves in shreds! The dark, jarred atmosphere is honed to perfection in a film oozing cynical pessimism and hopelessness.
Some of the visual tricks we might have seen before - the sudden, jerky movements, for example - but they work well and never fail to horrify. The director expertly plays on movements and atmospheres that just seem 'wrong' and unnatural to the viewer, and all the more terrifying for it.
In terms of continuity it follows on well, developing the original Grudge storyline, answering questions and filling in gaps. Saying that, it made sense to a friend who had not seen the first film, so all in all it makes for a good night in hiding behind the sofa!