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Xperia Z1 comes with a Physical Hard Reset Button, just noticed.
so How to hard reset Xperia Z1 ? just Press and Hold down OFF Button with a tip of a pen or a similar object for 3 seconds.
SOURCE - http://www.xperiaguide.com/2013/09/12/xperia-z1-comes-with-a-physical-hard-reset-button/
Oh. Fantastic. I too own Xperia Z1. I never knew this. This is awesome. Thanks for this. I think, only a very few know this. Keep it up. Discover more and bring out more in software side also.
Please, only a few know this, because almost nobody actually read the manual.
This information along with the illustration is from the beginning in the official user's manual for the phone.
This is not a secret.
Official User Guide, page 116:
I read the manual 
You can get it here http://www-support-downloads.sonymobile.com/c6902/userguide_EN_C6902-C6903-C6906_1_Android4.2.pdf
I found this by mistake as I thought it was the button to push out the sim card!
Does this hard reset button put everything back to factory settings?
No. It works like a power switch in the computer, just shuts it down by force.
Yes. It works pretty much the same as PC's ATX power button.