Judging from the condition it's possible that it's from the postwar era. The flag is mostly katakana, probably occupying service member names? I agree it looks like a souvenir.
Hoskin (ホスキン) is the name in the center of the flag. Looks like Tokyo (東京) on the left, and it says ジャパン, Japan in katakana at the bottom. Some of the other stuff is hard to discern, at the top it says ライン and.. メゴウイヤ? Maybe meant to be Ryan McGuire or something along those lines? Almost makes me think this was maybe something a Japanese teacher or liaison gave to some service members who were learning how to write their names. But that's a wild guess.
The most info you can get from it would probably be from the blue ink on the bottom right. Looks like someone signed their name in English, and wrote "Yokohama," along with some other names in Japanese.