Console.readPassword() should always look for new input stream buffer.
Here the Console.readPassword(), reads the input stream 'Java' which is visible in the Input Stream Buffer 'Hello Java', left after reading 'Hello' with reader.read(char[],0,5) method and its not allowing the user to enter the password.
  Console readPassword methods should not read the input stream left in the input stream buffer.It should allow the user to enter the characters in invisible mode.

see the version,code and Result.
<version>
C:\work>java -version
java version "1.6.0-auto"
Java(TM) 2 Runtime Environment, Standard Edition (build 1.6.0-auto-284)
Java HotSpot(TM) Client VM (build 1.6.0-ea-b56, mixed mode)
</version>

<code>
import java.io.*;
class TestConsole5 {
public static void main(String[] args) {

Console con =System.console();
String s1=null;
char un[]=new char[20];
char pw[]=new char[20];
try{
if (con != null) {
Reader reader = con.reader();
con.printf("user name: ");
reader.read(un,0,5);
con.flush();
con.printf("Password : ");
pw=con.readPassword();
con.printf("%nuser name : %s %n", new String(un) );
  con.printf("password : %s ", new String(pw));

}
}catch(IOException e){
e.printStackTrace();
}
}
}
</code>
<Result>
C:\work>java TestConsole5
user name: HelloJava
Password :

user name : Hello
password : Java
</Result>
SQE failing testcase: java_io/Console/TestConsole7
Another SQE test also affected: java_io/Console/TestConsole1