Don't let some egomaniac (the interviewer) discourage you. If you're spending *any* free time studying Java, I'd say you have passion to learn.
The challenge with starting a project for the sole purpose of learning is that it's difficult to come up with a problem to solve (i.e. the domain).
Try to think about something practical that you could use in your daily activities. For instance, you could write a program to track how much you eat per week. Or maybe a system to track how much time you spend doing individual tasks at work (good for tracking time wasted gabbing with that annoying tech lead in Meaningless Drivel
The fact is, you will be fighting an uphill battle finding a job with your qualifications. That aside, I think if you could complete a small project in your own time and could effectively talk about it during an interview you will land a job. It might not be the highest paying to start with, but you will have your foot in the door.