Hi, Simon.
That's most likely will depend on what passwords you are talking about. I can assure you that passwords of user entries created in Gluu's own LDAP directory (like, from web UI, or imported from Excel spreadsheet) are being encoded by OpenDJ itself. That's because, if you'll change them by directly modifying entry's "password" attribute in the directory, you will still be able to log in with them (by default Gluu uses LDAP bind operation to prove that credentials provided at login screen are valid)
But it's different for OIDC clients' credentials, and for credentials Gluu uses to connect to its own and backend LDAP directories, for example. Those are being encrypted with a key known to Gluu before they are placed in config files or in config entries within LDAP directory.