While Chris Woodhead, his counterpart in England, has antagonised the profession with claims that 15,000 teachers are incompetent and should be sacked, Mr James's non-confrontational work has won praise.
The report for 1995-96 covered inspections at 402 schools as well as visits to teacher-training establishments. It found that overall standards were satisfactory or better in just under 85 per cent of classes in primary schools, with classes in secondary schools just topping that figure.
In primary schools standards overall improved in Welsh as a first language, mathematics, oral work and reading in Welsh as a second language, geography at key stage 1, art and music. In secondary schools standards were found to have risen "very considerably" in science at key stage 3 and in design and technology, largely as a result of curriculum changes.
The progress of seven to 11-year-olds was often hampered by the limited range of reading and writing they were required to undertake, says the report. "A substantial minority of pupils of average or below average ability in secondary schools do not achieve accuracy in their writing". The ability of pupils in both secondary and primary schools to perform mental calculations showed continuing weakness.
Although class sizes had not increased significantly, some instances of inflated numbers were recorded. The quality of teaching in primaries continued to improve and in all but a handful of secondaries up to 95 per cent of classes received teaching rated "satisfactory or better".
Mr James's conclusion that "for the third consecutive year it is good to be able to report continuing improvements in the quality of education provided by schools and in the standards attained by pupils" won strong backing.
David Winfield, secretary of the National Association of Head Teachers in Wales, declared: "In Wales things are improving because teachers are not knocked in the way Mr Woodhead does in England. Mr James emphasises that inspections are carried out 'without fear or favour' - a very important statement."
Alun Jones, regional officer of the National Association of Schoolmasters Union of Women Teachers in Wales, concurred: "We are happy to have a chief inspector prepared to listen to teachers; the report endorses the success of this approach."
The National Union of Teachers pointed to the report's concern over the deterioration of school buildings - half the primary schools in Wales need urgent attention. Heledd Hayes, the union's education officer in Wales, said: "The physical state of schools affects the quality of education to a considerable extent. We want to see this problem resolved as quickly as possible."
The Welsh Secretary, William Hague, saw signs of progress: "This excellent news promises much for the future of education in Wales."
Labour's education spokesman for Wales, Win Griffiths, said: "The report makes a positive contribution to improving standards."
Mr James's successor has yet to be named, but teachers and education administrators are keeping their fingers crossed in the hope that a James Mark II will emerge.
English report, page 13, Ofsted's star schools, page 14