There are three kinds of character in this film: a boy, a mermaid, and the police(probably controlled by government) This film takes place in some country where people are controlled and banned from imagining during the war. There was a boy who fell in love with a mermaid, which is actually a fish. He wants to live and be with her. However, the government of the country did not allow people to imagine such a fantasy, and they arrested and imprisoned him. The boy was tortured in many ways in order to make him unable to imagine. He endured the tortures but finally he became unable to imagine and when he came back home all he could see was a fish, not a mermaid. However, in the end, I think a boy became a mermaid himself and went to the fantasy world together with a mermaid.
I think Osamu Tezuka wanted to tell us how important it is to imagine, and that if we keep on believing, somehow it will come true.