Two of the nine policy board members at the Bank of Japan again proposed cutting the 30-35 trln yen liquidity target for banks, during a meeting last month, according to the minutes of the meeting released today. The proposal was rejected by a majority vote with the board deciding to keep the target range in order to help the Japanese economy overcome deflation. At the Aug 8-9 policy meeting, Katsutoshi Fukuma proposed reducing the outstanding balance of current account deposits held at the BoJ to "around 27 to 32 trln yen," the minutes said. This suggestion was rejected by a vote of eight-to-one. Another member, Atsushi Mizuno suggested a steeper reduction in the reserve level to 25-30 trln yen, which was also voted down by the same margin. At the end of that meeting, BoJ governor Toshihiko Fukui proposed to maintain the liquidity target at 30-35 trln yen, and won the support from six other voting members. Both Mizuno and Fukuma disagreed with the majority's decision. "It would be appropriate to start lowering the outstanding balance of current accounts at the Bank at an early stage to ensure financial market stability in the period around the termination of the quantitative easing policy," Mizuno said. For his part, Fukuma warned of the future risk of sharp spikes in interest rates. He said there is "a possibility that maintaining a huge outstanding balance of current accounts at the Bank would hinder the process of restoring the proper functioning of the market and cause excessive risk taking based on unrealistic expectations that the current extremely accommodative conditions would continue for a very long time." Representatives from the Ministry of Finance and the Cabinet Office have urged the central bank's policy board members to maintain the quantitative monetary stance, citing risks to the economy from surging crude oil prices and deflation. Fukui has repeatedly said that the BoJ would not start cutting the liquidity target aggressively, until Japan fully overcomes deflation. However, he has said the central bank will be open to any changes in trends in the money market and the need for funds among financial institutions, suggesting the BoJ could reduce the target level, should its money market operations continue to fail. BoJ deputy governor Kazumasa Iwata said recently that he believes prospects are "good" for an end to the country's seven-year battle with deflation, while adding it may not be long before the central bank can also look to exit its four-year-old quantitative monetary easing policy.