Unfortunately, there is no way to automate password creation with the current product using the API or otherwise.
The original intention of the user import wasn't as a replacement for integration with identity stores such as Active Directory, where 100s or 1000s of users would be synchronized with SM. The original purpose was to solve creation of small sets of users.
That said, clearly folks in this thread are part of that group of users that do indeed want to use the user import as a way of managing 100s or 1000s of users. So, this thread has prompted us to think about how might improve this in the future. The most obvious improvement, to me at least, would not be a feature to set passwords but rather allow users to do a password reset on their own.
I can't offer up any short term fixes for this, other than offering help if indeed there as a store of user credentials in Google, AD, Azure, or some OAuth capable system.
Product Manager for Meraki SM