The 42-year-old had been a Cherries regular since signing in September but, having previously conceded just one goal in last his last five appearances, James gave away a penalty and let in three in the defeat at Walsall.
But Howe was full of praise for the way the former Liverpool and Portsmouth keeper took the decision that Shwan Jalal was starting at Victoria Park.
"David is still very much part of our squad and will be going forward," he told the Bournemouth Echo. "He took it like a man. He was disappointed. He is very much a team player and very much wants us to achieve our goal of promotion. There is certainly no animosity.
"He is a real gentleman. Sometimes you have to make difficult decisions but it has been done with the best intentions.
"David has done very well for us and been a big part of our unbeaten run."
Meanwhile, striker Wes Thomas was not involved against the side rock-bottom of npower League One due to a potential move away from the club.
"We will wait and see what happens with Wes," Howe said. "There is interest in him and I think he has a desire to go. If he doesn't then we will review the situation."