Pearson brought James, a former Manchester United trainee, to the King Power Stadium during the summer.
The 21-year-old made a slow start to life at the npower Championship club but has started to show his ability in recent weeks.
James has started the last four games, with Pearson believing his performances have improved with each one.
"There is no doubt in my mind that we have a very good player in Matty," said Pearson ahead of his side's trip to Bristol City on Saturday.
"Coming into the season, he hadn't played a lot of football over the past 12 months, so it is a big year for him in that sense.
"But I am really pleased with how he has progressed this and certainly he is a team player. He is someone who, when he is not in the side and disappointed, is very supportive of his team-mates.
"Now he has the opportunity and he has taken it very well, getting better and better, and I am pleased for him."