[BUG] Claude Code for VS Code 2.1.117: Read/Edit tools fail on Windows when username contains \uXXXX sequence

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

The Read and Edit tools in the VS Code extension fail with "file does not exist" when the Windows username contains a character sequence that matches a Unicode escape. For example, a username of u0041xyz contains \u0041, which is interpreted as Unicode codepoint U+0041 (A), so the path C:\Users\u0041xyz\... is mangled to C:\UsersAxyz\... before it reaches the filesystem. All Read and Edit tool calls fail as a result.

My username follows this pattern as it was assigned by my organisation on a managed device — I am unable to change it.

What Should Happen?

Backslashes in Windows file paths should be treated as path separators, not Unicode escape characters. Read and Edit tools should resolve paths correctly regardless of the username.

Error Messages/Logs

File does not exist. Note: your current working directory is (removed)

Steps to Reproduce

1. Have a Windows username containing a sequence matching \uXXXX where XXXX is a valid Unicode codepoint (e.g. u0041xyz, where \u0041 = A)
2. Open a project in VS Code with the Claude Code extension v2.1.117
3. Ask Claude to read or edit any file in the project
4. The Read/Edit tool receives a mangled path (e.g. C:\UsersAxyz\...) and returns "file does not exist"

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.114 (Claude Code for VS Code)

Claude Code Version

2.1.117

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

The Bash tool is unaffected because it uses Unix-style forward-slash paths. Only the Read and Edit tools, which construct Windows-style backslash paths, are affected. The issue is specific to usernames where a letter-digit sequence happens to form a valid \uXXXX Unicode escape — a pattern that may be common in organisation-managed devices where usernames are system-assigned.