According to the game's creator, Tomonobu Itagaki, the games in the Ninja Gaiden universe (the two new games and the earlier NES Trilogy) form a single continuous story
VideoGamer.com: We've read that this is the last chapter in the Ninja
Gaiden saga. Is there any truth to that?
TI: I really put all my heart and soul into making this the definitive
game in the Ninja Gaiden franchise. So I personally don't intend to
make any more. This is a game we basically built from the ground up.
We threw away everything we had from the first game, improved on what
was good, changed what was bad. So it's been a long project, it's been
close to three years in the making. We were able to accomplish
everything that we wanted to achieve with this franchise.
In story chronology as well, this takes place after the first Ninja Gaiden for Xbox and then after, the story of this game it leads into the old NES ones, so I think we have a nice continuity there.
Ninja Gaiden 2 Preview
Obviously this doesn't account for some canon discontinuity, but that can be put down to production error.