James had been doing everything to be get fit and told Southgate he believed he could be ready in time for England’s second group game against the United States on November 25.
But Southgate did not think James would have been fit until the knockouts and said selecting a player who could not play in the group stage would be “deemed arrogant in some circles”.
The England manager did not feel he could risk James, with Kyle Walker also not fully fit after undergoing groin surgery.
Explaining his decision to leave out James, Southgate said: “We had to make a very difficult call with Reece, who is a fantastic player.
“But he was not going to be available, if everything went perfectly, until the latter stages of the tournament, and there were too many unknowns for us on that road to recovery.
“Also I do not think we can take a player who is not available for the group stage, that would be deemed arrogant in some circles.
“But then if everything went well and he was available, then we would be dropping him into a quarter-final after eight weeks out, and that would be really demanding. A tough call. Kyle is a long way ahead of that and is progressing really well.”