Until about a year ago, Tsugo Narasaki was a happy and prosperous businessman who managed three canning factories around this area of southern Japan.

From his Taiyo Food Co., conveyor belts rolled cans of the delicious mandarin orange juice which he exported profitably to the United States, Canada and Western Europe. Canned mushrooms, pineapples, asparagus, and cherries also flowed from his small plants to Western markets.

Then the Japanese yen went up, Narasaki's business went down, and he is staring bankruptcy in the face. He was forced to sell one factory to a friend, a cookie manufacturer. He cut orange-juice canning in half. American customers such as Del Monte and Libby tell him that with the yen so high they can't afford the price he needs to charge to break even.

"The yen, the yen," Narasaki says with a sigh. "I am up late at night because of the yen."

So are thousands of other small businessman in Japan whose profits are partially dependent on export sales. As the yen appreciates rapidly against the U.S. dollar, their products become too expensive in Western markets. Narasaki's price went from $9.36 a case in 1975 to $12.65 in 1977 and his customers found less expensive orange juice in other countries.

On the other hand the Japanese government has been under strong pressure from the United States and Western European countries to reduce its heavy trade surplus with them. Permitting the yen to increase in value is one step in that direction.

Thousands of small businessmen are going broke in Japan this year. Because they are bound by the Japanese custom of guaranteeing lifetime employment to their workers, they have no choice except bankruptcy. In October alone, nearly 1,600 firms went bankrupt and the year-end total is projected at 18,000 companies, well above normal levels.

Since January the yen has risen about 18 per cent against the dollar. All strata of Japanese business have felt the pinch of declining exports. Auto companies are forced to raise their prices on export models and even the major steel companies are losing ground in the hotly disputed American markets.

A survey of 392 major corporations disclosed that their pre-tax earnings between April and September were down 23 per cent from a year ago, principally because of lower export-oriented companies have dropped sharply on the exchange.

Japanese big business is better prepared to absorb losses for a long time. Moreover, the government is always ready to protect the big firms from catastrophic collapses.

Small and medium-sized firms that export everything from bicycles to binoculars, however, cannot easily survive yen shock.

The textile industry, which includes hudreds of small producers, faced stiff foreign competition even before the current yen appreciation. Now the industry's prices have been forced far above those of the international competition cotton and wool producers have begun dismentling one-fifth of their spindles in an agreement worked out with the Ministry of Internationl Trade and Industry.

In the southern coastal region around this picturesque, small city, the fish-packaging companies are in serious trouble. Narasaki talks of a friend in the tuna business who loses 5,000 yen ($20) on each case of tuna he ships and still has trouble finding markets abroad. He has stockpiled more than 100,000 cases, waiting for something to happen.

In all of Japan, an estimated 3.6 million cans of tuna, intended for the United States, have been stored in warehouses for the last two months.

In the apple-growing region on northern Honshu, the largest island of Japan, growers must cut prices drastically to maintain overseas markets. A couple of weeks ago, when the exchange rate was 250 yen to the Dollar, the growers expected to lose 500 yen on each box shipped. Now the rate has slipped to 240.

Similar crises are reported among the toymakers of Tokyo, who export about 30 per cent of their products. Other hard-hit industries are stainless flatware, binoculars, sewing machines, china and bicycles.

The small businessman's position has become so perilous that about 3,000 of them held unusual street demonstrations in Tokyo recently to publicize their unhappiness with the government and the yen.

Their leader claimed that 20 firms go bankrupt and put 1,500 workers out of jobs every hour.

Their demand for help seems to have been heard by Prime Minister Takeo Fukuda, whose new cabinet has approved a sizable assistance, package including low-interest loans to help small firms pay debts.

Some industries have tried to solve their export crisis by mutual restraint. Naraskaki and other fruit-canners agreed to cut back their combined export by about 25 per cent this year, hoping that each could survive with a smaller market.

Narasaki does not thing it will help much. He blames much of his problem on big business, such as the auto industry, which he says refuse to limit exports and piles up Japan's big trade surplus, causing the yen to appreciate further.

Narasaki hopes to bungle through the yen shock somehow by increasing domestic sale, nevertheles, he fears the competition will be strong and worries about what will happen to his 400 remaining workers, who look to him for life-time jobs.

"What my real hope is, is to stop being president of this company," he says.