According to the doc [1]:

    ...you can instead specify these values by setting the
    following system properties to indicate the realm
    and KDC, respectively:

        java.security.krb5.realm
        java.security.krb5.kdc

    If you set values for these properties, then they override
    the default realm and KDC values specified in krb5.conf (if
    such a file is found). The krb5.conf file is still consulted
                                              ******************
    if values for items other than the default realm and KDC
    are needed.

However, in code of sun.security.krb5.Config [2]:

122 String kdchost =
123 java.security.AccessController.doPrivileged(
124 new sun.security.action.GetPropertyAction
125 ("java.security.krb5.kdc"));

                ....

137 if (kdchost != null) {

                .... using system properties as settings ....
                .... and do NOT read config file anymore ....

151 } else {
152 // Read the Kerberos configuration file
153 try {
154 Vector<String> configFile;
155 configFile = loadConfigFile();
156 stanzaTable = parseStanzaTable(configFile);
157 } catch (IOException ioe) {
158 // No krb5.conf, no problem. We'll use DNS etc.
159 }
160 }

[1]
http://java.sun.com/j2se/1.5.0/docs/guide/security/jgss/tutorials/KerberosReq.html
[2]
http://hg.openjdk.java.net/jdk7/tl/jdk/file/ff32c270102a/src/share/classes/sun/security/krb5/Config.java
A customer in japan using Sun OpenSSO Enterprise 8.0 deployed on webserver 7 running on JDK1.5.0_15

The JDK does not read the properties in the file : /etc/krb5/krb5.conf.

For details, please refer to http://mailfinder3.sfbay.sun.com/thread/4546861