Victor Cha, a senior advisor on North Korea to the Bush administration, made the warning during a meeting in Pyongyang with Kim Kye-gwan, North Korea's top nuclear weapons negotiator.
"The North Koreans have not dealt with the abduction issue in good faith, and they have not dealt with the nuclear issue either"
Japanese foreign minister
"They don't have a lot of time," a US official with knowledge of the meeting told the Associated Press.
Cha is in North Korea as part of a bipartisan US delegation led by Bill Richardson, the US Democratic presidential candidate, to recover remains of American servicemen killed in the 1950-53 Korean War.
"They just can't be in receive mode, they have to be in action mode," the US official said after Cha and Kim met on Tuesday morning.
Under the six-nation deal agreed in Beijing in February North Korea has until Saturday to take initial steps toward dismantling its nuclear program, including closing its main nuclear reactor.
In exchange the other parties to the deal have agreed to provide the North with economic aid and political concessions.
Japan meanwhile has also moved to ramp up pressure on North Korea over both its nuclear programme and its abduction of several Japanese citizens in the 1970s and 80s.
The sanctions bill extended on Tuesday bans all imports from North Korea and blocks all North Korean ships from entering Japanese ports.
According to a February 13 agreement, North Korea had 60 days to shut its nuclear facilities in return for energy aid.
But last month North Korea walked out of a meeting aimed at building on that deal when the transfer of $25m frozen in a Macau bank account was held up, apparently by technical complications.
"The North Koreans have not dealt with the abduction issue in good faith, and they have not dealt with the nuclear issue either," said Taro Aso, the Japanese foreign minister.
Aso blamed North Korea for its inflexibility over the funds row.
Japan, a signatory to the nuclear pact, has insisted that the funds row should not be used as an excuse for the North to renege on its agreement to dismantle its nuclear programme.
"Our fundamental stance is one of pressure and dialogue, and appropriate pressure is sometimes necessary to hold dialogue," said Yasuhisa Shiozaki, Japan's chief cabinet secretary.
Pyongyang only agreed to shut down the its Yongbyon nuclear reactor after the US promised to resolve the financial issue within 30 days – which Washington has failed to do.
Earlier on Tuesday Christopher Hill, the top US nuclear negotiator with North Korea, welcomed as a positive sign reports that North Korea was prepared to immediately accept the return of UN nuclear inspectors once the funds issue is resolved.
"I think what was positive coming out of Pyongyang yesterday was the report that the DPRK is prepared to take these steps and get the IAEA (International Atomic Energy Agency) in there," Hill told reporters in Tokyo.
Hill, who was in the Japanese capital to discuss with officials how to resolve the financial impasse, has said the impending deadline for shutting North Korea's reactor would be difficult to meet.
"We're unfortunately still focused on this issue. Every day this banking matter holds us up, it makes it more difficult to meet the precise deadline," he said.
On Monday the US acknowledged that North Korea may miss the reactor deadline and said it was open to an extension, recognising that all parties were "working in good faith".
But Washington has said it will not accept a partial shutdown of the facility. Hill has urged North Korea to keep its side of the bargain regardless of the funds transfer dispute.