In Japanese, four-digit Gregorian years are read only as single numbers. Therefore, 1988 is . Reading the number 1988 as (and therefore reading 1988 as ) with instead of is acceptable but I think that it is non-standard. Neither “ ” nor “ ” is correct. The latter might be understandable, but I would be surprised if a native speaker understands “ ” as the year 1988.
As in English, years are sometimes abbreviated by omitting the first two digits when they are obvious. If someone says 88 in the contemporary context, it must mean the year 1988. In this case, 88 is read as .
> Q2. What(and how strong) is the preference for the type of reading for years in Japan? In Gregorian years or in the format of Japanese-Era + Year number?
It is mostly the matter of style and personal taste. Sometimes Gregorian years are used because they are more convenient for calculation, and sometimes Japanese years are used by tradition (as in many official documents issued by government).