The final } of the method is unreachable - you only get a compilation error if it's possible to get to the end of the method without returning a value.
This is more useful for cases where the end of the method is unreachable due to an exception, e.g.
private String find(int minLength) {
    for (String string : strings) {
        if (string.length() >= minLength) {
            return string;
        }
    }
    throw new SomeExceptionIndicatingTheProblem("...");
}
The rule for this is in the JLS section 8.4.7:
If a method is declared to have a return type (§8.4.5), then a compile-time error occurs if the body of the method can complete normally (§14.1).
Your method can't complete normally, hence there's no error. Importantly, it's not just that it can't complete normally, but the specification recognizes that it can't complete normally. From JLS 14.21:
A while statement can complete normally iff at least one of the following is true:
- The whilestatement is reachable and the condition expression is not a constant expression (§15.28) with valuetrue.
- There is a reachable breakstatement that exits thewhilestatement.
In your case, the condition expression is a constant with value true, and there aren't any break statements (reachable or otherwise) so the while statement can't complete normally.