Should we be surprised? No.
Should we be worried? Yes.

Since it continues to shrink it means less and less games will be produced AND released outside of Japan.

The Japanese are like the pandas of the human world, you put a male and female in a room together and they just don't even seem to understand what they could possibly do with one another.  Really, the "greying of Japan" has been an issue for decades, it shouldn't surprise anyone. 

Fortunately, PS4 will improve that

yet they still make more games and outproduce countries like UK

Doesn't count digital sales on the consoles though right?

that doesnt hinder you buying more than japanese or shouldnt hinder you from having any publishers or console manufactors on the other hand.