use Inline Config => DIRECTORY => 'home/me/here';
or
use Inline Java => Config => DIRECTORY => '/home/me/here';
[download]

Below is the code in my test script.

use Inline Java => "STUDY",
           STUDY => [],
           AUTOSTUDY => 1,
           STARTUP_DELAY => 40,
           PORT => 14567,
           JNI => 1,
           EXTRA_JAVA_ARGS => '-Xmx800m',
           DIRECTORY => "/u/narlab/InlineLib/";

use Inline::Java qw(study_classes
                    cast
                    caught);

use Inline Java =>  <<'EOJ';

 public class Test {
     public static void init() {
        System.out.println("test");
    }
 } 
EOJ

    my $t = Test->new();
    $t->init();
[download]

Unix output

narlab@vnc3.hyd:/u/narlab/InlineLib> ls -la
total 32
drwxr-sr-x   3 narlab narlab  4096 May 14 15:37 .
drwxr-sr-x 107 narlab narlab 24576 May 14 15:21 ..
drwxr-sr-x   2 narlab narlab  4096 May 14 15:19 code


narlab@vnc3.hyd:/u/narlab/InlineLib/code> ls -la
total 20
drwxr-sr-x 2 narlab narlab 4096 May 14 15:19 .
drwxr-sr-x 3 narlab narlab 4096 May 14 15:37 ..
-rwxr-xr-x 1 narlab narlab  797 May 14 15:08 test.pl
-rwxr-xr-x 1 narlab narlab  759 May 14 15:10 test1.pl
-rwxr-xr-x 1 narlab narlab  525 May 14 15:11 test2.pl

narlab@vnc3.hyd:/u/narlab/InlineLib/code> perl test2.pl
test
narlab@vnc3.hyd:/u/narlab/InlineLib/code> ls -la
total 24
drwxr-sr-x 3 narlab narlab 4096 May 14 15:39 .
drwxr-sr-x 5 narlab narlab 4096 May 14 15:39 ..
drwxrwsr-x 4 narlab narlab 4096 May 14 15:39 _Inline
-rwxr-xr-x 1 narlab narlab  797 May 14 15:08 test.pl
-rwxr-xr-x 1 narlab narlab  759 May 14 15:10 test1.pl
-rwxr-xr-x 1 narlab narlab  525 May 14 15:11 test2.pl

narlab@vnc3.hyd:/u/narlab/InlineLib> ls -la
total 44
drwxr-sr-x   5 narlab narlab  4096 May 14 15:39 .
drwxr-sr-x 107 narlab narlab 24576 May 14 15:21 ..
drwxrwsr-x   2 narlab narlab  4096 May 14 15:39 build
drwxr-sr-x   3 narlab narlab  4096 May 14 15:39 code
-rw-rw-r--   1 narlab narlab   683 May 14 15:39 config
drwxrwsr-x   3 narlab narlab  4096 May 14 15:39 lib
[download]

Yes, that doesn't look right. It's as though it just ignores the DIRECTORY setting completely.

One would expect that if DIRECTORY was not a valid option there, then the script would croak (or at least complain) with a message that tells you so ... but maybe Inline::Java doesn't do that.
What happens if you replace "DIRECTORY" with "RUBBISH" in your script. Does it then complain that RUBBISH is an unknown option ?

Does it work as intended if you rewrite the script as:

use Inline Config =>
 DIRECTORY => "/u/narlab/InlineLib/";

use Inline Java => "STUDY",
           STUDY => [],
           AUTOSTUDY => 1,
           STARTUP_DELAY => 40,
           PORT => 14567,
           JNI => 1,
           EXTRA_JAVA_ARGS => '-Xmx800m';

use Inline::Java qw(study_classes
                    cast
                    caught);

use Inline Java =>  <<'EOJ';

 public class Test {
     public static void init() {
        System.out.println("test");
    }
 } 
EOJ

    my $t = Test->new();
    $t->init();
[download]

UPDATE: You could also try use warnings; and see if that provides any useful diagnostics as to why DIRECTORY is being ignored.

Cheers,
Rob