The problem is that object-oriented is not really well defined and can mean a lot of things. This article explains the problem in more detail:
http://www.paulgraham.com/reesoo.html
Also, Alan Kay (the inventor of Smalltalk and author(?) of the term "object-oriented") famously said that he hadn't C++ in mind when thought about OOP. So I think this could apply to Java as well.
The language being fully OO (whatever that means) is desirable, because it means better orthogonality, which is a good thing. But given that Java is not very orthogonal anyway in other respects, the small bit of its OO incompleteness probably doesn't matter in practice.