Comment 2 for bug 1100116

There is a workaround. You can first create the user using user-create without a password specified, then you can call user-password-update to set the password interactively (not part of the command line).

browne@ubuntu:~/devstack$ keystone user-create --name test3
+----------+----------------------------------+
| Property | Value |
+----------+----------------------------------+
| email | |
| enabled | True |
| id | aa1fccae2b5844e2a144bd6580994cad |
| name | test3 |
+----------+----------------------------------+
browne@ubuntu:~/devstack$ keystone user-password-update test3
New Password:
Repeat New Password:
browne@ubuntu:~/devstack$