How to extract or trace out the letters from logo all seperately ?

Would it be better to do this in Illustrator.  Take a typeface in.  Turn it into an object then get rid of the fill and give it a stroke?

I mean, if I were to build a typeface or wanted to change a type face I would do it in Illustrator and not Photoshop.

Not sure what exactly you want to do. Here is my try:

After removing white background or masking undesired elements create selection, ensure that some selection tool is active then right click and choose: Create Work Path with 0 tolerance. This will create work path which you can find in Window > Paths panel.

If I understand correctly, it sounds like you'd like to apply this style to a font that you'd like to create for a Japanese script. If that's the case, then I'd recommend using Styles (Window > Styles). You can type in some sample text and apply Layer Styles (Layer > Layer Styles) and when you get it the way you want it, click on New Style... in the Layer Style dialog. The following settings approximate what is in that logo when applied to some sample text I made at 72pt:

• Stroke: Size: 1 px, color: black
• Gradient Overlay: change the stops to yellow to red, Angle: -45
• Drop Shadow: Distance: 9px, Spread: 0, Size: 2

Then you can draw the glyphs for the script and apply the style.

To turn it into a font, you could use Fontself.