It happens more often than you would imagine, on all sorts of airlines.

BA and LH, for example, often sell sell only J tickets even if the plane has a First cabin, and then let J passengers pick the First seats (priority to Golds and those on higher fares). So it's not an upgrade, just a better seat.

Usually, this happens for operational reasons (aircraft subs or unavailability of the regular model), but commercial reasons can drive it too.

In your case, it was just the one J passenger, so it would have been crazy to upgrade so many Y passengers and incur the expense of providing a full J service. It is definitely more prudent to do what they did.

If it were just a couple of empty J seats (highly unlikely on this sector, regardless of what the JP kids tell us), things may have been different.

And do you really think Jet know the first thing about goodwill?