Here is Luther's preface to the epistle of James and Jude (Luthers Works p. 395-398). After 1530, the comments in red were removed. It is rather evident that Luther did not consider James Scripture ("I do not regard it as the writing of an apostle"), even if the book was in his Bible. (The Deuterocanonical books were also in his Bible). There were four books that Luther did not consider a part of the "true canon"; Hebrews, James, Jude and Revelation, curiously all these books (in some fashion) went against his "faith alone" theology.
Luthers Preface To James and Jude
Though this epistle of St. James was rejected by the ancients, I praise it and consider it a good book, because it sets up no doctrines of men but vigorously promulgates the law of God. However, to state my own opinion about it, though without prejudice to anyone, I do not regard it as the writing of an apostle, and my reasons follow.
In the first place it is flatly against St. Paul and all the rest of Scripture in ascribing justification to works 2:24). It says that Abraham was justified by his works when he offered his son Isaac (2:20); Though in Romans 4:22-22 St. Paul teaches to the contrary that Abraham was justified apart from works, by his faith alone, before he had offered his son, and proves it by Moses in Genesis 15:6. Although it would be possible to "save" the epistle by a gloss giving a correct explanation of justification here ascribed to works, it is impossible to deny that it does refer to Moses' words in Genesis 15 (which speaks not of Abraham's works but of his faith, just as Paul makes plain in Romans 4) to Abraham's works. This fault proves that this epistle is not the work of any apostle.
In the second place its purpose is to teach Christians, but in all this long teaching it does not once mention the Passion, the resurrection, or the Spirit of Christ. He names Christ several times; however he teaches nothing about him, but only speaks of general faith in God. Now it is the office of a true apostle to preach of the Passion and resurrection and office of Christ, and to lay the foundation for faith in him, as Christ himself says in John 15[:27], "You shall bear witness to me.? All the genuine sacred books agree in this, that all of them preach and inculcate [_treiben_] Christ. And that is the true test by which to judge all books, when we see whether or not they inculcate Christ. For all the Scriptures show us Christ, Romans 3[:21]; and St. Paul will know nothing but Christ, I Corinthians 2[:2]. Whatever does not teach Christ is not yet apostolic, even though St. Peter or St. Paul does the teaching. Again, whatever preaches Christ would be apostolic, even if Judas, Annas, Pilate, and Herod were doing it."
But this James does nothing more than drive to the law and its works. Besides, he throws things together so chaotically that it seems to me he must have been some good, pious man, who took a few sayings from the disciples of the apostles and thus tossed them off on paper. Or it may perhaps have been written by someone on the basis of his preaching. He calls the law a "law of liberty" [1:25], though Paul calls it a law of slavery, of wrath, of death, and of sin.
Moreover he cites the sayings of St. Peter [in 5:20]; Love covers a multitude of sins" [1 Pet. 4:8], and again [in 4:10], "Humble yourselves under he had of God" [1 Pet. 5:6] also the saying of St. Paul in Galatians 5[:17], "The Spirit lusteth against envy." And yet, in point of time, St. James was put to death by Herod [Acts 12:2] in Jerusalem, before St. Peter. So it seems that [this author] came long after St. Peter and St. Paul.
In a word, he wanted to guard against those who relied on faith without works, but was unequal to the taskin spirit, thought, and words. He mangles the Scriptures and thereby opposes Paul and all Scripture. He tries to accomplish by harping on the law what the apostles accomplish by stimulating people to love. Therefore I cannot include him among the chief books, though I would not thereby prevent anyone from including or extolling him as he pleases, for there are otherwise many good sayings in him. Therefore I will not have him in my Bible to be numbered among the true chief books, though I would not thereby prevent anyone from including or extolling him as he pleases, for there are otherwise many good sayings in him. One man is no man in worldly things; how then, should this single man alone avail against Paul and all Scripture.
Concerning the epistle of St. Jude, no one can deny that it is an extract or copy of St. Peter's second epistle, so very like it are all the words. He also speaks of the apostles like a disciple who comes long after them [Jude 17] and cites sayings and incidents that are found nowhere else in the Scriptures [Jude 9, 14]. This moved the ancient Fathers to exclude this epistle from the main body of the Scriptures. Moreover the Apostle Jude did not go to Greek-speaking lands, but to Persia, as it is said, so that he did not write Greek. Therefore, although I value this book, it is an epistle that need not be counted among the chief books which are supposed to lay the foundations of faith.
Did Luther Consider James Scripture?