According to his FB entry, he is still rehabbing his right knee. Probably, he wants to be sure that he is healthy and he saves some of his energy. He did the same last year as he started in San Jose in February and it proved to be a good decision.
However, it shall be mentioned that James lost a few matches in a similar fashion in his career, e.g. vs Nieminen 0-6,2-6 (Stockholm 2010), Istomin 3-6,0-6 (Cincinnati 2010), Spadea (San Jose 2005). Maybe, it was simply a very bad day at the office or he played conservatively to check his state of health.