Some believe so, but to me it clearly looks like an imaginary pet (pun intended). In the YouTube video above, at 1:15-ish, you can clearly see the Merchant petting nothing but air. Also the line "She'll bite your little fingers off" wouldn't make as much sense for a sword as it does for a pet
Hah, that is creepy. Nice voice impression though!
Edit: Rin from FFX comes to mind as a favorite, although I do have a slight grudge for not giving us stuff for free right before we enter Sin!