str.format() doesn't handle unicode arguments:

Python 2.6.4 (r264:75706, Oct 27 2009, 15:18:04) 
[GCC 4.2.1 (Apple Inc. build 5646)] on darwin
Type "help", "copyright", "credits" or "license" for more information.
>>> '{0}'.format(u'\u3042')
Traceback (most recent call last):
  File "<stdin>", line 1, in <module>
UnicodeEncodeError: 'ascii' codec can't encode character u'\u3042' in
position 0: ordinal not in range(128)

Unicode arguments should be treated in the same way as the % operator
does it: by promoting the format string to unicode:

>>> '%s' % u'\u3042'
u'\u3042'