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Big daddy resolved it 
You have to sacrifice resetting the phone using the Sony PC software 1st. Avoid data backup from old accounts.
Then, after the reboot is done and Android is reinstalled with update x.x.x.534 goto the dialer & type *#*#7378423#*#* then press dial
In the menu that will come go to calibration and then choose proximity sensor. (If you run the test it might give error = -1) Then, set settings to default and it may ask to reboot the device.
After reboot type *#*#7378423#*#* then press dial. In the menu that will come go to calibration and then choose proximity sensor do the test and it will show success. VIOLAAAaaaa!!!!
Check the phone...it works 
Have tested this and the issue is resolved on my phone finally ....yippieeeeeee!!!
Hi, I also don't have the option to calibrate proximity sensor, only gyroscope and accelerometer, any tips?
I am getting an error code-98 pls help
Hi,
i also had the issue. I was using screen guard. i think that caused the issue. after calibration the problem was solved.
Mine is NOT resolve. I get the following error message when calibrating my Xperia Z:
Failed(timeout) Please retry. Or your phone may not support this function Error Code m= -98
I have already reset it to factory default and done it many times, always with the same error.
I HATE THIS PHONE.
i also have error code -98 and i have a screen protector on. Can the protector film be the reason? and do you have any solutions ?
HI im having the smae problem on my xperia z ultra and its auto rotation sensor but every time i calibrate it gives me error code=-5
I am having this issue as well. My screen will not reactivate until the caller disconnects. TOtally aggravating!! Has anyone had any luck with the ProximitySensor Calibration app? I installed it but it errors out when I try to run it.