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Jacobson has been ruled out of the Rugby World Cup with just over a week before the All Blacks' first game of the tournament against the Springboks, after suffering a delayed onset of concussion.
Hansen said the 22-year-old had not shown any signs of concussion after the All Blacks' test against Tonga last week, but they presented upon arrival in Japan.
With Jacobson ruled out, the natural replacement would have been Squire, who plays for the Highlanders and Tasman Mako.
The flanker was under a self-imposed exile from the All Blacks - later revealing that he didn't feel "physically or mentally" ready for the pressures of test rugby - but was kept on as a possible injury replacement.
"After what has been a really tough year for me mentally and physically, and after speaking with people I trust on whether I should make myself available again for the All Blacks, I felt I wasn't ready just yet physically or mentally for the pressures of test match rugby," Squire wrote in an Instagram post.
"I feel I need to earn the right to pull on the Black jersey again through performing well for my beloved Tasman Mako and keep ticking the boxes there.
"As Steve said yesterday, if the All Blacks do get injuries, and I'm performing well enough, then I'm 100% available."
However, Hansen said today the situation around Squire hadn't changed from when the initial World Cup squad was announced.
"Not really because nothing has changed," the coach said when asked if Squire was considered as an injury replacement.
"It's happened right at the beginning of the tournament. We had the discussion and that was based around the time over here so nothing has changed from that point of view for him."
Instead, Highlanders flanker Shannon Frizell has been called up as a replacement and will arrive in Japan on Saturday.
Jacobson, who was one of the bolters in the World Cup squad, said he understood the decision, despite his disappointment.
"I'm gutted to be missing the Rugby World Cup. However, I completely understand that this decision has been made with my health and best interests at heart.
"Whilst I'm feeling 98 percent okay, I know I'm still not quite right and by taking a break now, I'll give myself the opportunity to continue my career in the future. I wish the team all the very best and will be with them all the way."
Hansen also revealed loose forwards Vaea Fifita and Dalton Papalii weren't considered for selection because they are currently injured.