The gear you select with the paddles is the highest gear it will shift to. I tried it today with my IS350 at WOT and in 2 and with 3 selected it didn't shift until redline. Same for the 3 - 4 shift. I think the figure if you are at WOT you want maximum acceleration, thus pegging out the tach before shifting. If you back out of the throttle just a little tiny bit, it will upshift. And yes it will downshift. It's trying to be "idiot proof". Like if you got stuck in a situation in 4th gear at say 10 mph, and had to take off fast, you would be in sad shape stuck in 4th with hardly any power. That's my thinking on it, and that's the way the IS300 was for 5 model years. It's not a true manual/auto shift. In most ways that's good. Some may find situations where they don't like it, but I always say that if you are doing spirited driving on a crooked road and find that the car is downshifting, then maybe you should have already shifted it in the first place.