The last time I tried (about a week ago), UTF-8 characters (especially Japanese) worked fine in URLs without any extra encoding. I even looked directly at the address bars in all the browsers I tested (Safari, Chrome and Firefox, all on Mac), and I have no idea which browser my girlfriend used on the windows. In addition to most of the windows that I looked at, I just showed squares for Japanese characters because they lacked the required fonts to display them. It seems to work well there too.
URL I tried: http://www.webghoul.de.private-void.net/cache/black-f-with- あ い -50.png (WMD doesn't seem to like it)
Proof of screenshot http://heavymetal.theredhead.nl/~kris/stackoverflow/screenshot-utf8-url.png
Thus, this cannot be allowed by the specification, since I saw that it works well in all directions, except, perhaps, in editors, which, like the specification, are many; -)
In fact, I would not recommend using these character types in URLs, but I would also not be the primary task of "fixing".
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