He leaves the Compass with you and runs off. Approach the town and you'll meet the young boy from earlier again.
These pink treasure boxes can be opened by spending Kitty Clumps - those odd flotaing orb things that you've been finding since the prison. Far to the north by the exit is a Katz who gives you a primer on Katz boxes. Anyway, keep heading north until you can go around southward and grab the Life Bottle from a chest at the end of the path. The enemies in this area also have a really good drop rate for new equipment if you're playing on Hard, so take advantage of it and grind for a bit so you can have plenty of excess stuff to sell at the shop later. After the opening sequence for the chapter, defeat the daemon first then view the two skits before turning around to claim the treasure chest with 320 Gald in it.
