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No YDK not solved this yet, tried hard reset, nothing has worked. I considered reverting back to older andorid version but pressing on the back reverse as mentioned suggests its hardware problem.
Probably just end up chucking the phone and never going back to Sony again.
You may need to perform a software repair using PC companion.The process will erase all internal memory.You might need to charge your device for about 1-2 hours before so the device has at least 60% battery.
Make sure the device is not connected to computer or laptop and turned off (sometimes you have to press power button and volume up until the device vibrates 3 times or on some devices you have to press the small button near the SIM tray or on the back of the device).
Open PC companion->support zone->phone/tablet software update->repair my phone/tablet blue highlighted.Follow the steps given,do not connect your phone until prompted to press volume down while plugging USB cable. If PC companion does not start the repair process, you might need to run it in compatibility mode with Windows 7 (in some cases XP).
Maybe before reformatting the phone try to clear Camera App memory. Settings / Applications / All / Camera / Force stop, clear data, reboot phone.
Thank you for your advise, but unfortunately it is still not working.... 
Nope....
So you have tried the software repair?
Yes, I did.