I can think of two ways to shrink your letters:
1) make a larger image, and call setImageAutoSize(true) on your TrayIcon
2) use a smaller font for the Graphics object.
You can do 2 like this:
Overall 1) should be easier since the size doesn't really matter. You can make the image any size (as long as it is a square), and let the system handle the resize. However, I don't know if it performs well. You will have to
test that.