Not that stock investors don’t have enough to ponder, but it doesn’t appear as if China will pick up the slack in the global economy as Japan recovers from its multiple disasters. In fact, neither does India, the other juggernaut of growth in addition to China. That’s because inflation is running at an uncomfortably high rate in Asia’s most important developing nations.

Growth in China, Japan, and India, in turn the world’s second, third, and eleventh largest economies, was already expected to moderate before Japan was struck by multiple catastrophes in March. Policymakers in China and India are grappling with surging food and energy prices that have the potential to create social unrest. The housing boom in China also needs to be restrained to keep home affordability within reach of its burgeoning middle class. Consequently, both China and India are taking steps to deal with inflation.

China’s central bank has increased reserve requirements and hiked interest rates several times in recent months to quell an inflation rate apparently headed for 5% in 2011, following an estimated 3.2% rise in 2010. Authorities aim to bring inflation down to a more manageable (4.0%) annual rate. Although China’s position on the world stage has improved dramatically in the past generation, its per-capita income remains relatively low. Those in charge don’t want to see another Tiananmen Square-type situation develop. Negotiations with Unilever (UL) to hold off on price increases for household goods this month indicate how serious officials are about addressing inflation.

Inflation fears are even more prevalent in India, where the general price level was rising at a double-digit clip 12 months earlier, and increased more than 9% for 2010 overall. That has pushed the Central Bank of India to hike rates steadily, apparently with some success. Inflation looks to be headed for about an 8% advance in 2011, and could fall further. The down side, of course, is that tighter monetary policy could apply brakes to India’s economy—at least to an extent.

Price stability is rising on the scale of importance in China and India partly because a large percentage of the population in those nations continues to be relatively impoverished. Inflation, especially hurts the poor, who use a disproportionately percentage of their income for food.

The shift away from all-out expansion in China and India is not great news for stock market investors, who value growth above all else. Shares of global companies, such as Exxon Mobil (XOM – Free Exxon Mobil Stock Report) and Caterpillar (CAT – Free Caterpillar Stock Report), have done very well over the past year, as the financial crisis has receded and a back-to-business tone has resumed.

Nevertheless, the presumptive economic advances on tap for China and India still promise to outstrip those of the Western world.  Mature economies in the United States and the European Union will be doing well to notch 3% GDP growth in 2011. China is expected to grow by a shade under 10% this year, while India looks to clock in at around 8%. Those would be very good numbers, if a shade less than those twin pillars of Asian growth managed in 2010.

Meanwhile, after finally registering a healthy GDP advance in 2010, Japan’s economy is set to pull back as it recovers from earthquake, tsunami, and nuclear reactor damage. The good news is that insurance money flowing into Japan will help the nation rebuild. The bigger hope is that this year’s chain of events will prove a turning point in Japan’s history, and help it awaken from its long economic slumber. But given the less favorable near-term signals emanating from China, Japan, and India, stock market investors could be in for increased volatility in the months ahead. 

At the time of this article, the author did not have positions in any of the companies mentioned.