He's never truly lost it, it's just that he stopped putting the effort into maintaining a facade when he realized he didn't know how long he could sustain it here. It's a lie when he claims to have no emotions of his own, but what he does have certainly isn't nearly as strong or frequent than an ordinary human.

"Are you very familiar with youkai and related spirits? Most are relatively harmless, but they can still be... tedious to deal with, for some."

In this case though Merlin happens to find Parsee quite entertaining, himself.