Atwal, who was nicely placed at three-under when he came to the 17th tee, dropped two shots and went to one-under after a card of one over 72 on the second day.
Only four of the eight Indians who started made the cut.
Jyoti Randhawa (73-69) and SSP Chowrasia (71-71) were lying tied 27th, while Anirban Lahiri (70-73) was tied 45th. Rahil Gangjee (71-75), amateur Pratap Atwal (76-75) and Rashid Khan (78-76) missed the cut, while Digvijay Singh retired.
Randhawa had four birdies against two bogeys, while Chowrasia rescued his round with an eagle on the 18th.
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Lahiri just could not get going with only one birdie on the front nine and three bogeys on the back stretch. He is now one-over 143 in tied 45th place. Tied with Lahiri is Thai Kiradech Aphibarnrat with rounds of 71 and 72.
Meanwhile, Adam Bland of Australia fired a three-under-par 68 to take the second round lead. The 32-year-old Australian compiled a two-day total of five-under-par 137 to take a slender shot lead over Thailand's Prayad Marksaeng and Korea's S K Ho who signed for matching 138 totals at the Ohtone Country Club.
Bland, who made the Japan Golf Tour through their Qualifying School in December last year, has missed the cut only twice in 11 starts.
Meanwhile, Liang is also drawing upon the positives from last week's tied-third finish in Sapporo to boost his hopes of lifting his first title in Japan this week.
Order of Merit leader David Lipsky (69-73) is lying tied 27th as is Japanese heartthrob Ryo Ishikawa 72-70.