After feeding him the candy stick, I use the mirror but it doesn't cause him to go back in his box.
The game is super picky: Don't have the bear in the hand, or the drum, make sure you did everything....
I don't exactly remember what triggers that bug, but I know there is a way of making him not react to the candy cane, maybe you managed the same.
I dropped everything except the candy stick and the mirror just to be sure and that didn't fix it.
I watched a couple of videos to make sure and I'm pretty sure I've done everything. I got the coin and used it in the machine to get the candy, used the oil lamp to defeat the puppet, played the drums to march the enemies blocking the doorway into the chest, and put the vanity case down to get the candy stick.
He is reacting when I hold up the mirror, but the mirror is only held up for a second or so, and he just sort of stops bouncing around, rather than screaming and retreating into the box. The videos I've watched it's held up for much longer; I'm not sure if there's some way of holding it up longer that I'm missing, or if that's just an animated sequence that happens.