Why is my Taiyaki (Cake that looks like a fish) too hard and dry?
I have never made these, but this is what I observe from comparing your recipe to the most readily found online ones:


Your mix is dry. Other recipes tend to have up to twice as much liquid as yours, by proportion to the flour.
Your mix has no egg. Every recipe I found included egg, in quantities
ranging from 1 egg per 1 cup flour to 1 egg per 1/2 cup flour.  
You include water in your mix. Other recipes I've found contain no
water.


These recipe differences mean that your mix has much less liquid than most and also, importantly I think, much less fat. Eggs and milk both contain fat which will give a more tender result.

You also mix all the ingredients directly together. Recipes I found recommended whisking the flour, salt and baking powder together then beating the egg in a separate bowl, creaming the egg with the sugar then adding the milk and only then gently combining the wet and dry ingredients being careful not to overmix. I'm not sure how much difference this makes, but mixing the sugar and dissolving it into the egg rather than putting it directly into a lower hydration mix will allow you to capture tiny air bubbles into your batter which will also tend to make the crumb more tender.