Trying to find the answer to my own question, I notice there has been some flip-flopping around the issue:
In the 1988 Insight book (entry "Jehovah") it was a translation:
But as far back as the 14th century the Tetragrammaton had already begun to be used in translations of the Christian Scriptures into Hebrew, beginning with the translation of Matthew into Hebrew that was incorporated in the work ´E´ven bo´chan by Shem-Tob ben Isaac Ibn Shaprut. Wherever Matthew quoted from the Hebrew Scriptures, this translation used the Tetragrammaton in each case of its occurrence.
In the 8/15 1996 Watchtower it was not:
Bear in mind that modern Hebrew versions are translations that may not present exactly what Matthew penned in Hebrew. The fact is that Jesus could well have used a word other than boh´, one that fitted the sense of pa·rou·si´a. We see this from the 1995 book Hebrew Gospel of Matthew, by Professor George Howard. The book focused on a 14th-century polemic against Christianity by the Jewish physician Shem-Tob ben Isaac Ibn Shaprut. That document set out a Hebrew text of Matthew’s Gospel. There is evidence that rather than being translated from Latin or Greek in Shem-Tob’s time, this text of Matthew was very old and was originally composed in Hebrew. It thus may bring us closer to what was said on the Mount of Olives.
In the 8/15 1997 QFR:
Is the Tetragrammaton (the four Hebrew letters of God’s name) found in the Hebrew text of Matthew copied by the 14th-century Jewish physician Shem-Tob ben Isaac Ibn Shaprut?
No, it is not. However, this text of Matthew does use hash·Shem’ (written out or abbreviated) 19 times, as pointed out on page 13 of TheWatchtower of August 15, 1996.
The Hebrew hash·Shem’ means "the Name," which certainly refers to the divine name. For example, in Shem-Tob’s text, an abbreviated form of hash·Shem’ appears at Matthew 3:3, a passage in which Matthew quoted Isaiah 40:3. It is reasonable to conclude that when Matthew quoted a verse from the Hebrew Scriptures where the Tetragrammaton is found, he incorporated the divine name in his Gospel. So while the Hebrew text that Shem-Tob presented does not use the Tetragrammaton, its use of "the Name," as at Matthew 3:3, supports the use of "Jehovah" in the Christian Greek Scriptures.
Shem-Tob copied the Hebrew text of Matthew in his polemical work ´E´venbo´chan. What, though, was the source of that Hebrew text? Professor George Howard, who has researched this matter extensively, suggests that "Shem-Tob’s Hebrew Matthew dates somewhere within the first four centuries of the Christian era." Others may disagree with him on this.
Howard notes: "The Hebrew Matthew incorporated in this text is characterized especially by its many differences from the canonical Greek Matthew." For example, according to Shem-Tob’s text, Jesus said about John: "Truly, I say to you, among all those born of women none has risen greater than John the Baptizer." It omits Jesus’ next words: "But a person that is a lesser one in the kingdom of the heavens is greater than he is." (Matthew 11:11) In a rather similar way, there are many differences between the extant Hebrew text of the Hebrew Scriptures and the wording in the corresponding text of the Greek Septuagint version. While we acknowledge their differences, such ancient texts have some place in comparative study.
As mentioned, Shem-Tob’s text of Matthew includes "the Name" where there is good reason to believe that Matthew actually used the Tetragrammaton. Thus, since 1950, Shem-Tob’s text has been used as a support for employing the divine name in the Christian Greek Scriptures, and it still is cited in The New World Translation of the Holy Scriptures — With References.
So the Watchtower now suggests that the Shem Tov text might be a direct descendent of the so-called "original Hebrew," acknowledges its huge textual differences from the Greek text and uses them when they see fit, but avoids the crucial question which follows from this stance: why should Matthew be translated from the Greek at all?
(Edit: sorry for the formatting)