Brake Fluid reservoir hose, is it suppose to be like this ?

[Goldenyaris]

Hi everyone
I have got 08 yaris sedan, with 2nz-fe. It got 40k miles on it.
I recently started to notice the sinking brake pedal. I quickly turned towards the brake master cylinder and noticed something like this, (attached file)

Is it normal ??? i can actually squeeze the pipe and the fluid struck between pipe and outer transparent shield will move.
Is this the major problem ? or my master cylinder is giving up ?

Here are the list of possibilities:
Leaking master cylinder.
Brake fluid is too old(about 6 years).
The hose has gone bad.

In the mean time the clutch pedal has also gone stiffer and if i am not wrong then in yaris the brake fluid is shared by the clutch fluid.


Thanks in Advance.