This is about the earliest it would have been *legal* under American law to do this. The US had given the required six months notice of the termination of the 1911 Japanese-American Treaty of Commerce and Navigation in July 1939, the six months notice period was complete by January 25, 1940.
As this is an economic step rather than an alliance building step or a militarizing step this probably is not too politically costly for the Roosevelt Administration, although it will have its critics.
The thinking motivating the American move is intended to protest continued Japanese aggression in China, but more importantly to limit Japanese resources should they contemplate joining Germany's side against Britain and France. Whether the end result is helpful or not, FDR thinks of this as "holding the ring" for the British and French.
What are the knock-on consequences of this?
Economically for Japan, they cannot get raw materials from the US, spend any accounts they have in the US or have imports delivered in American merchant ships.
However, given the Craigie-Arita settlement (
https://en.wikipedia.org/wiki/Tientsin_incident) and the memory of the recent and unwelcome Tianjian Crisis, London is not likely to follow the US moves in lockstep. So, Japan can continue to import goods from the British Commonwealth and spend its sterling-denominated assets.
However, even though the war in Europe is not active and is "phony" at this stage, Britain is not likely to want or to be able to fill all potential Japanese demand.
I don't see other international oil producers like the USSR, Romania or the Dutch East Indies following the American lead either. Latin American oil producers are a question mark. The US has a lot of leverage over them.
What happens to the Japanese economy and what next steps does the Japanese government contemplate?
Economically for the U.S., it loses its Japanese export market, which is bad for some oil producing areas. But does Allied purchasing of fuel and metals end up picking up most of the slack?
Does this US measure end up causing the Japanese difficulties they try to fix by military means? If so, when and where do the Japanese take additional military action? What emergency economic measures do they undertake in the interim?
In particular, once the the phony war turns to blitzkrieg, what do the Japanese do, if they have not done something already?