Can sodium borohydride reduce hemiacetals?
The major purpose of $\ce{NaBH4}$ in the second step of given reaction sequence is the demercuration, which stops at the hemiacetal as the applied condition is the limit (at $\pu{0 ^\circ C}$ for $\pu{1 min}$).
In general under usual conditions (at $\pu{25 ^\circ C}$ in ethanol for for an hour or two), $\ce{NaBH4}$ reacts with hemiacetals and reduce them to corresponding diols. For instance, $\ce{NaBH4}$ reacts with glucose, which is a hemiacetal in aqueous solutions, to give sorbitol, the corresponding diol (Ref.1). The reaction has been done in water and at room temperature ($\pu{20-25 ^\circ C}$) for $\pu{1-2 h}$. Thus, running the given reduction in $\pu{0 ^\circ C}$ for shorter time make sense.
Also, although lithium aluminum hydride ($\ce{LiAlH4}$) is too vigorous a reagent for reduction, under carefully controlled conditions, it can be used to convert lactone to lactol (cyclic hemiacetal such as monosaccaride) without reacting further to give the corresponding diol. However, excess $\ce{LiAlH4}$ would give the corresponding diol after reacting further with lactol (Ref.2,3):


References:

M. Abdek-Akher, J. K. Hamilton, F. Smith, &quot;The Reduction of Sugars with Sodium Borohydride,&quot; J. Am. Chem. Soc. 1951, 73(10), 4691–4692 (DOI: https://doi.org/10.1021/ja01154a061).
2.Glen E. Arth, &quot;Reduction of Lactones to Hydroxyaldehydes with Lithium Aluminum Hydride,&quot; J. Am. Chem. Soc. 1953, 75(10), 2413–2415 (DOI: https://doi.org/10.1021/ja01106a040).
Robert A. W. Johnstone, &quot;Chapter 1.11: Reduction of Carboxylic Acids to Aldehydes by Metal Hydrides,&quot; In Comprehensive Organic Synthesis - Selectivity, Strategy and Efficiency in Modern Organic Chemistry, Volumes 8: Reduction; Ian Fleming, Volume Editor; Barry M. Trost, Ian Fleming, Editors-in-Chiefs; Pergamon Press: Oxford, United Kingdom, 1991, pp. 259-282 (ISBN: 978-0-08-040599-1).