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Passwords can be set on addUser but cannot be changed on updateUser. However, it is simple to change (reset) a user's password with a separate renderRequest action.
Example - Confluence Server
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--action renderRequest --request admin/users/dosetuserpassword.action?username=testuser --requestParameters "newPassword=xxxxxx&newPasswordConfirmation=xxxxxx" --file "" |
Example - Jira Server
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--action renderRequest --request secure/admin/user/SetPassword.jspa --requestParameters name=testuser@&password=xxxxxx&confirm=xxxxxx --file "" |
Example - Cloud
With the switch over to Atlassian ID for Cloud, passwords can no longer be changed through the application. Go to https://id.atlassian.com, login, and select Change password.