When held, this weapon reduces damage received from direct attacks.

Is this simply referring to the defense from crafting or is there an actual hidden damage reduction?

The weapon's been out for many months. It wouldn't take very long for such a damage reduction feature to have been found.

We all know Nexon is never the best at wording, and no one's ever mentioned or provided evidence of a damage reduction existing since the weapon's inclusion, so its most likely merely defense stat.