How does the J instruction work in MIPS?

In MIPS, J is a J-type instruction: So we have a target that is 26-bits long. It gets combined with the PC of the next instruction as follows: It is shifted left 2 bits, since MIPS instructions (ignoring the MIPS16 extension) are 32-bits long, meaning they all start in an address whose lower 2 bits are zero.
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