The former double world champion, 23, missed the 2014 Commonwealth Games due to recurring trouble in her left knee.
She also underwent surgery on a long-standing shoulder problem but Sutton said the knee injury was still a cause for concern.
"Becky has had a few setbacks over the last week or so," he said.
"We looked like getting her back in the spring but there have been one or two little complications.
"I have no detailed report. That is kept between the doctors, medical team and her rehab team.
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"They are doing a great job and she is getting the best treatment possible."
James aggravated the knee injury when she returned to training following a period of rest after a minor medical procedure.
The Abergavenny-born track cyclist won silver and bronze for Wales at the Commonwealth Games in 2010, but came to international prominence at the 2013 Track World Championships.
She won golds in the keirin and sprint and also picked up bronze medals in the team sprint and 500m time trial in Minsk.
James missed out on the London Olympics in 2012 after a season wrecked by injury and illness, but Australian Sutton has no doubt that success at Rio 2016 remains realistic.
"I am totally confident we will get her right for Rio," Sutton added.
"Another four or five weeks is really not going to matter. She has lost a lot of time but give us 12 months and a clean bill of health, then Becky will be knocking them over in Rio.
"We are talking about a girl that is one of the best on the world stage.
"If anyone is going to survive this and cope mentally, it will be Becky."

But wins for Kent and Lancashire later in the evening meant they were eliminated from the competition.
Colin Ingram hit 102 off 93 balls in Glamorgan's 251-9, with James Harris taking 4-38 against his old club.
But Malan and Paul Stirling (58) began Middlesex's reply with a stand of 139 as they reached 255-2 in 39.4 overs.
Stirling was caught off Kieran Bull and paceman Dewi Penrhyn Jones, playing only his second game for the Welsh county, had Sam Robson lbw for 22.
By then, however, it was far too late with Malan in full cry at the other end and he hit four sixes, one of them striking the top-tier balcony, and 18 fours in his 128-ball innings.
Neil Dexter finished the game in style by clearing the rope from a free-hit following a no-ball by Penrhyn Jones, whose 6.4 overs cost him 73 runs.
Middlesex seamer James Harris told BBC Wales Sport:
"We played really well from start to finish after losing the toss, bowled really well upfront and never let Glamorgan get away from us, I managed to get a few cheap wickets at the end.
"For us to finish it off with a bit of style and for Dawid (Malan) to play so well, it was a very satisfying day.
"For Dawid to start like that and build an innings, when you have 140 on the board before you lose a wicket you're going to win a lot more one-day matches than you lose. Then for him to carry on and score 150 was pretty special."
Glamorgan century-maker Colin Ingram told BBC Wales Sport:
"It's always nice to come to Lord's, it's a good day out and I just kept working hard. When you're playing well it's key to realise that and try to extend it as long as possible. I was fortunate again to do that today and thoroughly enjoyed it."
"It was nice to see two young guys (spinners Andrew Salter and Kieran Bull) do well, so that's invaluable experience for them and even some of the other younger guys, it'll be a good experience if a harsh one."
Becky James has suffered a setback in her recovery from a serious knee injury, says British Cycling chief Shane Sutton.
[NEXT_CONCEPT]
Dawid Malan hit a brilliant unbeaten 156 as Middlesex completed their One-Day Cup group stage fixtures with an eight-wicket win over Glamorgan.