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The installation process requires that the environment variable JAVA_HOME points to the Java Development Kit (JDK) on your computer.
Set the environment variable JAVA_HOME according to your local JDK installation. Please adapt the path in the following examples according to the JDK installation on your system. If you are using a Windows system that might be:
octave> setenv("JAVA_HOME","C:/Java/jdk1.6.0_21");
Note, that on both system types, Windows as well as Linux, you must use the forward slash '/' as the separator, not the backslash '\'.
If you are using a Linux system this would look probably more like:
octave> setenv("JAVA_HOME","/usr/local/jdk1.6.0_21");