Do you mean in the Java server side? In which server platform? The way this normally works is that the user logs in using the username/password. Then you get back an authorization token which is a static randomly generated key to access the services in the server. That saves you the need from passing username/password to the server. If you have a local password on the device you can use the bouncy castle cn1lib which includes hashing functions such as SHA, MD5 etc.
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