Suppose a circle with centre on the #y# axis passes through more than #2# rational points. Then at least two of those points do not lie on the same horizontal line. Let's call them #A# and #B#.
The midpoint of #AB# is also a rational point #M# and the slope of the line through #M# perpendicular to #AB# is finite and rational.
This line is the set of points equidistant from #A# and #B#, which includes the centre of the circle.
Since #M# is rational and the slope of the line is rational, it intersects the #y# axis at a rational point, which is the centre of the circle.
Since #(0, sqrt(2))# is not rational, there can be no such rational points #A#, #B# on a circle with #(0, sqrt(2))# as its centre.