Function for replacing the nth occurrence of a character in nth line. Results: http://oi63.tinypic.com/2wm17ig.jpg

CharacterReplace.java

package javaapplication1;

import java.io.BufferedReader;
import java.io.BufferedWriter;
import java.io.FileNotFoundException;
import java.io.FileReader;
import java.io.FileWriter;
import java.io.IOException;
import java.util.regex.Matcher;
import java.util.regex.Pattern;

/**
 *
 * @author haris
 */
public class CharacterReplace {
    
    public static void main(String args[]) {
        String file = "/Users/haris/Desktop/src.txt";

        try {
            CharacterReplace.textReplace(file, "_", "X", 1, 3);
            CharacterReplace.textReplace(file, "_", "Y", 2, 2);
            CharacterReplace.textReplace(file, "_", "A", 4, 5);
            CharacterReplace.textReplace(file, "_", "B", 5, 4);
            
        } catch (Exception e) {
            System.out.println("Exception Caught. Printing Stacktrace:");
            e.printStackTrace();
        }
    }
    
    public static void textReplace(String file, String subject, String replacement, int line, int index) 
            throws FileNotFoundException, IOException {
                
        final StringBuilder contents;

        // Read the contents of the file
        try (BufferedReader reader = new BufferedReader(new FileReader(file))) {
            contents = new StringBuilder();
            int currentLine = 1;

            // Read the file contents line by line
            while (reader.ready()) {
                StringBuffer tmp = new StringBuffer();
                
                // Check if the current line is the line to be replaced
                if (currentLine == line) {
                    int currentIndex = 0;
                    Pattern pattern = Pattern.compile(subject);
                    Matcher matcher = pattern.matcher(reader.readLine());
                    
                    // Find the index and replace
                    while (matcher.find()) 
                        if (++currentIndex == index) 
                            matcher.appendReplacement(tmp, replacement);

                    matcher.appendTail(tmp);
                } else {
                    tmp.append(reader.readLine());
                }
                
                // Append to a string
                contents.append(tmp.toString()).append("\n");
                currentLine++;
            }
        }
        
        // Overwrite the file with processed data
        final String stringContents = contents.toString();
        try (BufferedWriter writer = new BufferedWriter(new FileWriter(file))) {
            writer.write(stringContents);
        }
    }
}