In the last issue of Heinz Kabutz\'s newsletter, #255 Java 10: Inferred Local Variables, it is shown that var is not a reserved word in Java 10, because you can
According to JEP-286: Local-Variable Type Inference, var is
not a keyword; instead it is a reserved type name.
(Earlier versions of the JEP left room for implementing either as a reserved type name or as a context-sensitive keyword; the former path was ultimately chosen.)
Because it's not a "reserved keyword", it is possible to still use it in variable names (and package names), but not in class or interface names.
I would think the biggest reason for not making var a reserved keyword is backwards compatibility with old source code.